Research Article 38
Journal of Finance & Economics Research - Volume 7, Issue 2 2022
By Abdul Nafay Sajid, Hassan Mujtaba Nawaz Saleem, Javed Iqbal
10.20547/jfer2207204
Keywords: Regime-switching models (RSM), Performance assessment, Portfolio optimization, Fertilizer industry, Risk-appetite.

The main aim of this research is to assess the performance of risk-appetite discriminated investors in the PSX listed fertilizers industry, using RSM and non-RSM, to maximize their portfolios' wealth. The research period (18 November 2015-June 30, 2021) is well characterized by the presence of two distinct volatility-related bull-regime and bear-regime, and it is divided into two groups: in-sample and out-sample. Throughout the out-sample time, different models are used to forecast the cumulative wealth of each investor. This cumulative wealth and the Sharpe ratios are calculated using the various models (RSM and Non-RSM). In stocks by using RSM the cumulated ending wealth of risk-averse investors, risk-neutral investors and risk-taker investors are 1.56, 1.54, and 1.53 respectively which is higher than the Non-RSM and their Sharpe ratios remains zero in both models. Investors may benefit from this study's asset allocation and limited capital apportionment to vary their portfolios. As a result, market regulators and policymakers may be better equipped to create and implement rules that safeguard stakeholders from unintended consequences, such as a transfer to a new shift of regime. The distinctiveness of this study derives from its attention on risk-appetite investors' portfolio wealth maximization issue, which is explored through technical analysis utilizing two entirely different models in the developing market's fertilizer stocks.

Submission Date: 7 May, 2022 Reviews Completed: 16 Jul, 2022
Acceptance Date: 23 Jul, 2022 Publication Date: 28 Jul, 2022