Portfolio Management on an Emerging Market: Dynamic Strategy or Passive Strategy?

Articl 5 Jarius

Portfolio Management on an Emerging Market: Dynamic Strategy or Passive Strategy?

Auteur: Pourakin Djarius Dieudonné BAMA
Correspondence: Assistant Professor, Department of Management, Ouaga II University, Faculty of Economics and Management Science, Ouagadougou - Burkina Faso, P.O. Box 343, Ouagadougou, Burkina Faso.
Received: June 2, 2020 Accepted: June 27, 2020   Online Published: June 28, 2020
doi:10.11114/bms.v6i2.4916 URL: https://doi.org/10.11114/bms.v6i2.4916

Abstract
At first glance, the portfolio management strategy seems like a resolved question, but practitioners continue to perform poorly on the stock markets. This paper  highlights the portfolio management in the specific case of the West African regional stock exchange, regarding two management strategies. These are dynamic strategy and passive strategy. Within this framework, we will compare an investor who is constantly betting on price fluctuations with another who is betting on dividends. Its originality lies in the approach that is used. Through a simulation methodology based on real market data, the main results indicate that an merging market is a savings market more than it is a speculation market. Besides, other results indicate that, one can predict on the West African regional stock exchange tomorrow’s prices from today’s prices. This does not mean that investors are making good predictions because the predictability of prices is due to the absence of changes in asset prices on the market. We draw the conclusion that it is difficult for one speculator to outperform the other. A rational investor would benefit from  nticipating the distribution of dividends rather than focusing on price fluctuations. Consequently, the buy and hold strategy is therefore the best to be rewarded in an emerging market. Nonetheless, this practice can lead to a decline in liquidity.
Keywords: passive strategy, dynamic strategy, portfolio management, volatility, emerging market