Application of Tactical Sector Allocation to Develop Optimal Forward-looking Sector Allocation Strategies for a Conventional Portfolio in Bursa Malaysia
Hani Nuri Rohuma (Ph.D.)

Abstract
This research examined whether the historical sector compositions could be used to develop the optimal forward-looking sector allocation strategies for a conventional portfolio on Bursa Malaysia over the out-of-sample period from 1 December 2006 to 30 November 2017. The optimal sector allocation strategy was developed to find each sector weight in the portfolio that maximised the Sharpe ratio in the preceding 12-months to estimate the optimal sector allocation for the following month (12-for-1 strategy), as well as for the following three months (12-for-3 strategy). The results indicated the roles of the financial, plantation, and consumer sectors were noteworthy in both kinds of strategies over the majority of the study period. However, during the global crisis period 2007/2008, the plantation sectorwas the safest investment to invest in.The research also found that the historical sector compositions can be used efficiently to develop the optimal forward-looking sector allocation strategies for a conventional portfolioin Bursa Malaysia.

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