An empirical analysis on dividend investing and value investing in malaysia stock market

Koh, Sin Yin (2022) An empirical analysis on dividend investing and value investing in malaysia stock market. Master dissertation/thesis, UTAR.

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Abstract

This study presents the empirical analysis of value investing and dividend investing in the Malaysia stock market during the year 2017 – 2021. The value investment portfolios studied in this study consist of the Top10 stocks with the lowest price-to-earning (PE) and price-to-book (PB) ratio in Kuala Lumpur Composite Index (KLCI) index. On the other hand, the dividend investment portfolios comprise the Top10 stocks with the highest dividend yield (DY) in KLCI index. At the same time, this study also investigates whether the application of Modern Portfolio Theory (MPT) optimization paired with annual reconstitution and rebalancing (ARR) approach is effective to improve the portfolio returns in comparison to the classic buy-and-hold (BH) and equally weighted (EW) stock allocation approach. The research outcomes show that the value portfolio constructed with the Top10 stocks of the lowest PE ratio in KLCI index generates the best return over 2017-2021. The second-best performer is the dividend portfolio and followed by the PB value portfolio in terms of 5 years (5Y) portfolio returns. The application of MPT optimization paired with ARR approach is effective to further improve the portfolio returns of PE value portfolios and dividend portfolios but generate inferior results on PB value portfolios. On the other hand, the application of EW and BH approaches are more suitable for both PE and PB value portfolios instead of dividend portfolios. The findings of this study also affirm the effectiveness of active investment strategy in Malaysia’s stock market which is in a weak form of efficiency.

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