Comparison of 2 Portfolios: Undiversified and Diversified Among Industries of Kazakhstan.
I. Introduction. a. Objective(s). It is out of doubt that no matter how diversified the portfolio is, systematic risk can never be eliminated. The risk associated with individual stocks can be reduced, but general market risks affect almost every stock. So it is important to diversify between different asset classes and industries as well. The key is to find a medium between risk and return. The objective of this paper is to discuss importance of diversification of investment portfolio within industries and project the theory on the example of two portfolios. The first portfolio tends to be undiversified and consists of shares of companies from banking sector. The undiversified portfolio is as follows: Portfolio 1 (Undiversified): 1) Kazkommertzbank JSC shares 2) Halyk Bank JSC shares 3) BankCenterCredit JSC shares The investments in the second portfolio are allocated among oil and gas, banking and telecommunications industries. Thus, it consists of following: Portfolio 2 (Diversified within industries): 1)”Kazakhtelecom” JSC shares 2) “Exploration and Production Kazmunaygaz” JSC shares 3) Halyk Bank JSC shares b. Methodology. We will use quantitative research in our paper. The last 2-year information, on the years of 2009 and 2010, from January till December, in total 24 months stocks’ prices will be used as basic data in our research paper. The historical data of the companies was retrieved from Kazakhstan Stock Exchange. The companies that will be used in analysis come from 3 industries of Kazakhstan - banking, telecommunication and oil and gas. The authors of the paper decided to chose those mentioned industry, to test the diversification, due to the fact that those industries are well developed relative to other industries. And stocks of the aimed companies are frequently traded at KASE, so we were able to retrieve monthly stock prices data of above-said companies. We are going to
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