Performance analysis of SES sector indices (1975 - June 1993)

• Main Authors: Lie, Kok Keong, Ho, Wilson Boon Chuan, Quok, Jong Eng
• Other Authors: Wendy Foo
• Format: Final Year Project
• Language: English
• Published: 2015
• Subjects: DRNTU::Business::Finance
• Online Access: http://hdl.handle.net/10356/63930
• Institution: Nanyang Technological University

The main objective of this Final Year Project is to evaluate the performance of 4 sectors - SES All - Industrial & Commercial, SES All - Finance, SES All - Hotel and SES All - Property vis-a-vis the market. This project is motivated by the recent surge of novice investors into the stock market and the national interest to invest and own shares. It attempts to provide an ex post view of the overall performance of the 4 sectors over the past 18.5 years from January 1975 to June 1993. This study uses 3 risk-adjusted measures based on CAPM- Jensen, Treynor and Sharpe indices to evaluate the performance of the 4 sectors. In computing the Jensen, Treynor and Sharpe indices, monthly adjusted indices of each sector and the market are collected and regressed. Simple regression is performed for the main period (Jan 1975- Jun 1993) and 3 sub-periods (1975- 1980, 1981- 1986, 1987- 1993). When analysing the performance of the 4 sectors, factors such as the economic growth, interest rates, market sentiment and major events like the Black Monday in 1987 and the Gulf War in 1991 have been considered. Based on the findings and analysis, the SES All - Industrial & Commercial and SES All - Hotel sectors were found to have outperformed while the SES All - Finance and SES All - Property sectors had underperformed the market. As a result, we should expect stocks in these 2 sectors to be undervalued and would be likely to be reappraised in the near future. It should be reminded that our expectation is not a prediction of the future performance of these stocks. However, as shown in the Afternote, our observations of undervaluation as stated in the preceding paragraph were not unfounded, in that, upon examination of the sector indices for the second half of 1993, more precisely as at 31 December 1993; the SES All - Finance and SES All - Property indices had registered increases of 70.77% and 78.30% respectively compared to that of the SES All - Share index which registered a gain of 40.10%.