Building an Optimal Trade Portfolio for Indian Spices Exports by Mean Variance Optimization

Authors

  •   D. Srinivasa Rao Associate Professor, KL University Business School, KL University, Guntur - 5220502 Andhra Pradesh

Keywords:

Trade Portfolio

, Portfolio Optimization, Trend Growth Rates, Instability Indices, Mean Variance Optimization, Value Added Spices, Efficient Frontier

C13

, C61, F14, G11

Abstract

An attempt is made in this paper to build an optimized trade portfolio for Indian spices sector in the context of the projection that India is going to be the world's processing hub of spices in the next ten years. The current Indian spices trade portfolio was constructed by estimating the weights of each of the fifteen spice items that constitute the trade portfolio and the trend of growth rates and instability indices for each of these items. The trend growth rates are considered as returns, and instability indices are considered as risks associated with each of the spice items in the trade portfolio. Using the mean variance optimization technique, a optimal portfolio that yields a 20% CAGR with minimum instability was obtained by utilizing the MATLAB program. The results indicate the need for reorganization of Indian spices trade portfolio in favour of value added items.

Downloads

Download data is not yet available.

Downloads

Published

2013-03-01

How to Cite

Srinivasa Rao, D. (2013). Building an Optimal Trade Portfolio for Indian Spices Exports by Mean Variance Optimization. Indian Journal of Finance, 7(3), 45–52. Retrieved from https://indianjournalofcomputerscience.com/index.php/IJF/article/view/72135

Issue

Volume 7, Issue 3, March 2013

Section

Articles

References

Barua, S. K. and Varma, J. R. (1991). “Master Shares: A Bonanza for Large Investors.†Pragna, 16(1), pp. 21-26.

Campa, Jose (2004). “Sources of Gains from International Portfolio Diversification.†CEPR Discussion Paper No 4390, pp.125-137, http://www.iese.edu/research/pdfs/DI-0559-E.pdf accessed on January 5, 2012.

Chand, R. and Tewari , S.C. (1991) . “Growth and Instability of Indian Exports and Imports of Agricultural Commodities.†Indian Journal of Agricultural Economics, 46(2), pp.159-165.

Charan, V. (1984) . “Instability In Export Earnings, Export Concentration and India.†Foreign Trade Review, 19, April-June, pp.143-150.

Elton, E. J., Gruber, M. J., Brown, S. J. and Goetzmann, W.N. (2010). 'Modern Portfolio Theory and Investment Analysis.' 8th Edition, Wiley & Sons, pp.41-64.

Fama, E.F. (1970). “Multi Period Consumption Investment Decisions.†American Economic Review, 60 (1), pp. 163 - 174.

Fernando, K.V. (2001). 'Practical Portfolio Optimization.' NAG Ltd., Oxford, pp.25-45.

Geeta .R,. Mathur, V.C. (2008). “Causes of Export Instability of Indian Agricultural Exports in New Economic Environment.†Division of Agricultural Economics, IARI, www.iari.res.in accessed on March 16, 2012.

Goel, M. and Kumar, S. K.(2006). “A Risk-Sensitive Portfolio Optimization Problem with Stochastic Interest Rate.†Journal of Emerging Market Finance, 4(5), pp. 22-25.

Goyal, S.K., Pandey, R.N. and Singh, J.P. (2000). “India's Agricultural Exports: Growth and Instability.†Foreign Trade Review, 35(1), pp.32-46.

Gujarati , N.D. and Sangeetha (2007). “Basic Econometrics.†4th Ed., Tata McGraw Hill, New Delhi, pp.182-187.

Gupta, R. and Basu, P. K. (2009). “Sector Analysis and Portfolio Optimization: The Indian Experience.†International Business & Economics Research Journal, 8(1), pp. 123-128.

Hakansson (1974). “Convergence In Multi Period Portfolio Choice.†Journal of Financial Economics, 1, pp. 201 - 224.

Kaundal, K.K and Sharma, M. (2006). “Agricultural Exports of India in the New Economic Environment.†Foreign Trade Review, 41(2), pp.3-34.

Khan, M.Y. and Jain, P. K. (2007). “ Financial Management.†5th Edition, Tata McGraw-Hill, New Delhi, pp. 3.1-3.18.

Kumar, N. and Singhal, K.C. (1989). “India's Export Instability.†Indian Economic Journal, 36(3), pp. 68-74.

Markowitz, H. (1952). “Portfolio Selection.†Journal of Finance, 7(1), pp. 77 - 91.

Mishra, A. K. (2011). “Optimization of Return under Risk constraint: An application on Indian Banks.†International Conference on Financial Management and Economics, International Proceedings of Economic Development and Research (IPEDR), 11, pp. 353-356, IACSIT Press, Singapore.

Mishra, A.K., Pisipati, S. and Vyas, I. (2011). “An Equilibrium Approach For Tactical Asset Allocation: Assessing Black-Litterman Model To Indian Stock Market.†Journal of Economics and International Finance, 3(10), pp. 553-563.

Pal, S. (1992). “Agricultural Exports of India: Issues of Growth and Instability.†Indian Journal of Agricultural Economics, 47(2), pp.185-193.

Panchamukhi, V.R. (1999). “Quantitative Methods and their Applications in International Economics.†in K.L Krishna (Ed.) “Econometric Applications in India.†Oxford University Press, India, pp.145-57.

Rao, U.V. and Venugopal, S. (2004). “Usefulness of Genetic Algorithm Model for Dynamic Portfolio Selection.†Journal of Financial Management and Analysis, 17(1), pp. 45-53.

Sarada ,C., Ravisankar ,T., Krishnan, M., and Anandanarayanan , C. (2006) . “Instabilities in Indian Seafood Exports: Sources, Shortfalls and Stabilization Measures- A Time Series Analysis.†CIBA Case Study No.7, Chennai, pp.12-25, http://www.ciba.res.in accessed on February 12, 2012.

Singh,T.(2004). “On The Optimizing Model Of The Balance Of Trade In India.†Journal of Policy Modeling, 26(5), pp. 605-625.

Suganya, N. C. and Pai, G. A. V. (2010). “Pareto-archived Evolutionary Wavelet Network For Financial Constrained Portfolio Optimization: Intelligent Systems In Accounting.†Finance and Management, 17(2), pp. 59 - 90.