Sains Malaysiana 52(10)(2023): 2999-3011

http://doi.org/10.17576/jsm-2023-5210-20

The Analysis Level of Optimism that Influence Investor’s Risk Tolerance in Asset Allocation

(Analisis Tahap Optimisme yang Mempengaruhi Toleransi Risiko Pelabur dalam Peruntukan Saham)

SITI NAZIFAH ZAINOL ABIDIN^1,2, SAIFUL HAFIZAH JAAMAN^2,* & AHMAD SYAFADHLI ABU BAKAR³

¹Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA Negeri Sembilan, Seremban Campus, 70300 Seremban, Negeri Sembilan, Malaysia

²Department of Mathematical Sciences, Faculty of Science and Technology, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia

³Mathematics Division Centre for Foundation Studies in Sciences, University of Malaya, 50603 Kuala Lumpur, Malaysia

Received: 12 June 2023/Accepted: 10 October 2023

Abstract

Investor’s risk of tolerance level has been widely categorized into three types, namely, risk averse, risk seeker and risk neutral. Nevertheless, in assessing the risk of a particular asset, investors that fall under the same risk tolerance classification may have different levels of optimism. It is thus beneficial to complement types of investor’s risk of tolerance with level of optimism. In this study, a fuzzy asset allocation model that satisfy heterogeneous investor’s risk of tolerance with regards to investor’s level of optimism is proposed. Enhancing Fuzzy Inferences System (FIS) with cooperation of optimism level, this study obtains a flexible fuzzy allocation model which is based on heterogeneous types of investor’s risk of tolerance combined with various level of optimism. Empirical evidence on 30 Malaysian shares employing the model developed shows that the proposed model successfully able to differentiate various combinations of investor’s risk of tolerance level and investor’s level of optimism. Furthermore, model is able to determine asset allocation and priority shares for each combination accordingly. In conclusion, it is shown that employing the proposed model allows investor to make beneficial investment decision according to his combined risk tolerance and level of optimism. 

Keywords: Fuzzy asset allocation; fuzzy inference system; heterogeneous investor’s risk of tolerance; investor’s level of optimism

Abstrak

Tahap toleransi risiko pelabur sering dikategorikan kepada tiga jenis iaitu, kehindaran risiko, pencari risiko dan risiko neutral. Walau bagaimanapun, dalam menilai risiko sesuatu saham tertentu, pelabur yang tergolong dalam pengelasan toleransi risiko yang sama mungkin mempunyai tahap optimisme yang berbeza. Oleh itu, adalah penting untuk melengkapkan jenis toleransi risiko pelabur dengan tahap optimisme. Dalam kajian ini, satu model peruntukan saham kabur yang memenuhi tahap toleransi risiko pelabur yang heterogen berdasarkan tahap optimisme pelabur dicadangkan. Dengan meningkatkan Sistem Penaakulan Kabur (FIS) dengan kerjasama tahap optimisme, kajian ini memperoleh model peruntukan kabur yang fleksibel berdasarkan jenis toleransi risiko pelabur yang berbeza digabungkan dengan pelbagai tahap optimisme. Bukti empirik terhadap 30 saham Malaysia menggunakan model yang dibangunkan menunjukkan bahawa model yang dicadangkan berjaya membezakan pelbagai gabungan tahap toleransi risiko pelabur dan tahap optimisme pelabur. Tambahan pula, model ini mampu menentukan peruntukan saham dan saham keutamaan bagi setiap gabungan. Kesimpulannya, telah ditunjukkan bahawa penggunaan model yang dicadangkan membolehkan pelabur membuat keputusan yang bermanfaat berdasarkan gabungan antara toleransi risiko dan tahap optimisme pelabur.

Kata kunci: Peruntukan saham kabur; sistem penaakulan kabur; toleransi risiko pelabur heterogen; tahap optimisme pelabur

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*Corresponding author; email: shj@ukm.edu.my