Effectiveness of the extended mean-variance model using fuzzy approach for portfolio selection in Malaysian stock market / Zulkifli Mohamed ...[et al.]

Purpose of the study is to investigate the effectiveness of the extended mean-variance model
using fuzzy approach in maximizing portfolio diversification benefit in the Malaysian stock
market. 10 types of portfolios involving 300 listed companies in Bursa Malaysia from 1998 to
2009 were used as a sample for the extended model testing. Linear programming optimization
tool was used to derive efficient portfolios. Portfolio superiority then been measured by using
the efficient frontier index (EFI). Empirical evidence revealed that the extended meanvariance
model is able to maximize portfolio’s diversification benefit in the Malaysian stock
market compared to the conventional mean-variance and the VBS fuzzy models. The result
provides on how the Malaysian investors could improve on their investment strategy. This
study is perhaps one of the first to address portfolio diversification benefit using the extended
mean-variance model in the Malaysian stock market.