Initial Selection of Investment in Active Optimal Portfolio by the Concept of Elton, Gruber and Padberg Model

Abstract

The current capital market is the effective market by the Efficient Market Hypothesis
(EMH) in which securities price will adjust expeditiously according to the condition of new data,
and then securities price at any of time will reflect various data completely. The investor could
select securities in the capital market with an abnormal return if the condition of the capital
market has highly fluctuated. This research was aimed to; 1) To select a group of active optimal
portfolio with a higher excess return to beta risk ratio than the crisis value or Cut-off rate, based
on the Elton, Gruber, and Padberg Model; 2) define the proportion of asset allocation from
balanced securities effectively; and 3) test the achievement of balanced securities. This research
was quantitative. The sample group was data of monthly closing price from January 2019 to
December 2023 (total 60 months) of 124 listed securities in the Stock Exchange of Thailand
(SET) using simple random sampling by drawing. The statistics were from Elton, Gruber and
Padberg Model. The findings revealed that 1) select a group of active optimal portfolio with a
higher excess return to beta risk ratio than the crisis value or Cut-off rate, based on the Elton,
Gruber, and Padberg Model, there were 9 from 124 securities that the investor selected in
balanced securities with an abnormal return comprised; rbf, jts, delta, nex, sappe, xpg , ichi , rcl,
and forth, where these securities had an excess return to risk beta that higher than critical value
or cutoff, and cutoff point was 0.9229; 2) defining the proportion of asset allocation revealed
that rbf was the greatest proportion the investor should invest: sappe, delta, nex, jts, ichi, rcl,
xpg, and forth, consecutively for the asset allocation from balanced securities effectively and can
reduce investment risks; and 3) testing the achievement of balanced securities by using Jensen
Measure revealed that 9 securities selected by Elton, Gruber and Padberg Model were worthy
for investment as the positive of Jensen’s Alpha which are proactive active securities. This
research supported retail investors, mutual funds, and financial institutions to use these data in
securities selection of active investment by the concept of Elton, Gruber and Padberg Model.
The concept of investment diversification is that the expected return from the portfolio of
securities must be at the highest level, and the risk of the portfolio of securities should be at the
lowest level to beat the market in the condition of the capital market that has highly fluctuated.