Optimal Portfolio Allocation and Risk Management for Investment in Securities in the Stock Exchange of Thailand as well as to Predict the Rate of Return by using Dollar-Cost Averaging Strategy

Abstract

This study proposes the optimal portfolio allocation and the risk management for Investment in Securities in the Stock Exchange of Thailand as well as to Predict the Rate of Return by using Dollar-Cost Averaging Strategy. This paper selecting stocks in the Stock Exchange of Thailand under the consideration criteria 1) Revenue Growth Rate, 2) Net Profit Growth Rate, 3) Return on Equity (ROE), 4) Book Value per Share (P/BV) and 5) Price / Earnings Per Share (P/E) are able to select 5 securities there are 1) Amanah Leasing PCL.- AMANAH,  2) Asia Sermkij Leasing PCL.- ASK,  3) Business Online PCL – BOL, 4) Com7 PCL. - COM7 and 5) Rajthanee Hospital PCL. – RJH which are time series from 1 January 2018 to 31 December 2022 total in 5 years. This paper applies the dynamic conditional correlation multivariate GARCH model to measure the dynamic correlation including the volatility of the time series.

The results of the study correlation between return of securities and time series show that the correlation varied over time and all securities have a positive correlation or going in the same direction. 

Optimal portfolio allocation with constrain maximize return also have high risk when compared to Equal weighted portfolio and Minimum portfolio. The result of Optimal portfolio consists of AMANAH 3%, ASK 5%, BOL 80%, COM7 10% and RJH 2% which has invested in the online business group as much as 80%, because during the selected period of study, it was during the COVID-19 situation and BOL was a business in providing online business information services which is suitable for COVID-19 situation.

The results of the study Dollar-Cost Averaging (DCA) which period 6 month from 1 July 2022 to 1 December 2022 comparing the average cost price to the closing price on December 31, 2022, show that return of the optimal portfolio was 4%, which is positive.