Proceedings of the International Conference on Business and Management Research (ICBMR 2020)

Asian Emerging Market Government Bond Portfolio Optimization Using Mean-Variance Analysis in the Presence of Duration Constraint

Authors
Feby Widyatantri, Zaäfri Ananto Husodo
Corresponding Author
Zaäfri Ananto Husodo
Available Online 23 December 2020.
DOI
10.2991/aebmr.k.201222.015How to use a DOI?
Keywords
Asian Emerging Market Local Currency Government Bond, Bond Indexes, Mean-Variance Analysis, Duration Constraint, Sharpe Ratio
Abstract

This study applies Markowitz’s mean-variance optimization method (1952) by setting duration constraint for an investment portfolio consisting of Asian emerging market local currency government bond indexes. The historical return data used in this study are obtained from daily bond indexes of Indonesia, Malaysia, Thailand, the Philippines, and Korea provided by ICE Data Indices, LLC (with permission) for the period of 2010-2019. This study shows that the portfolio composition strategy resulting from the optimization provides the highest Sharpe ratio from January to June 2020 (out-of-sample) compared to several other strategies without any duration constraint, such as capitalization-weighted and equally-weighted, as well as other strategies with duration constraint. End-of-month performance monitoring between January 2020 and June 2020 indicates that the Sharpe ratio of the optimal strategy began to increase after market volatility due to COVID-19 pandemic anxieties, which peaked around March 2020. The optimization strategy in this study would be an alternative strategy for conservative investors to perform asset allocation as a long-term investment policy to have exposure to Asian emerging market before adding other asset classes, such as Asian emerging market corporate bonds and stocks.

Copyright
© 2020, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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Volume Title
Proceedings of the International Conference on Business and Management Research (ICBMR 2020)
Series
Advances in Economics, Business and Management Research
Publication Date
23 December 2020
ISBN
10.2991/aebmr.k.201222.015
ISSN
2352-5428
DOI
10.2991/aebmr.k.201222.015How to use a DOI?
Copyright
© 2020, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Cite this article

TY  - CONF
AU  - Feby Widyatantri
AU  - Zaäfri Ananto Husodo
PY  - 2020
DA  - 2020/12/23
TI  - Asian Emerging Market Government Bond Portfolio Optimization Using Mean-Variance Analysis in the Presence of Duration Constraint
BT  - Proceedings of the International Conference on Business and Management Research (ICBMR 2020)
PB  - Atlantis Press
SP  - 103
EP  - 109
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.201222.015
DO  - 10.2991/aebmr.k.201222.015
ID  - Widyatantri2020
ER  -