The Comparison of capabilities between portfolios Invest in common stocks and real estate and construction mutual funds

Abstract

The objective of this research is to study the ability to generate average returns and the risk of investing in common stocks and the PROPCON (Property and Construction) portfolio in three investment portfolios: a portfolio of common stocks in the property and construction sector, a portfolio of REITs (Real Estate Investment Trusts) in the property and construction sector, and a combined portfolio of common stocks and REITs in the property and construction sector. The analysis is based on the monthly closing prices of 168 securities in the PROPCON group in the Stock Exchange of Thailand, covering a period of three years from January 2020 to December 2022. The research also tests hypothetical portfolios optimized using the Sharpe Ratio to assess their respective abilities, comparing all three portfolios, and benchmarking them against the stock price index in the property and construction sector (PROPCON) to evaluate their abilities in portfolio management based on actual returns over the following six months.

The study revealed that the investment portfolio in common stocks and the combined portfolio of common stocks and mutual funds in the property and construction sector (Common Stock + PF&REITs) exhibited similar movements in terms of returns. However, the portfolio investing in REITs and mutual funds in the property and construction sector (PF&REITs) showed different patterns. When comparing the ability to generate returns of the investment portfolios against the stock price index in the property and construction sector (PROPCON), it was found that the portfolios had better risk management capabilities than the market. Specifically, they had lower negative returns, which supports the hypothesis that portfolio management has a higher potential for generating returns or effectively managing risks