The Optimization of Portfolio Management in Emerging Capital Markets

The study investigates how portfolio management could be optimized in emerging market by focusing on equity portfolio management at EDC Investments Ltd. Therefore the merit of a rotation strategy that shifts the equity portfolio allocation among cyclical and defensive stocks listed on the Ghana Stock Exchange is investigated over 5-year period from January 2006 to December 2010. The rotation strategy uses the Bank of Ghana's monetary policy stance to time the economic trend in the portfolio allocation process. The strategy produced more than 300% in excess of the market returns and more than 150% in excess of the sample portfolios' returns over the sample period. Besides, diversification across major African equity markets shows that, exposing the portfolio to various markets precludes the portfolio from being subject to the fluctuations of only one market while enhancing performance.