Optimal Portfolio Selection: An empirical study of SIC Insurance Company’s Investments

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Numerous intelligent systems techniques have been used to select an optimal investment portfolio. These techniques take into consideration the return and the risk of each asset in order to build the best portfolio. This research sets up to evaluate the investment performance of SIC portfolio through optimal portfolio selection. The research identifies specifically the overall investment objective of SIC, its assets selection, the portfolio mix and to evaluate their overall portfolio performance using the Sharpe,Treynor and Jensen Alpha models. The research methodology dwells on functionalist philosophy using a case study as research strategy. It uses the inductive approach to help provide new insights into optimal portfolio selection process. The triangulation method was also used to validate the data and quantitative techniques was used for the analysis. The paper finds out that, SIC Insurance has not been able to make strides expected from their investment management although their returns look good. Application of the Sharpe, Treynor and Jensen Alpha indicates that the performance of the portfolio is below the market index and therefore there is a need to look at the selection procedure. The ability of SIC to undertake good research in order to add value to their various investments may be a key decision in optimal portfolio selection. The work revealed that measurement and management of risk is a central issue in finance and a huge effort must be made in order to analyse it. It concluded by making a number of recommendations that asset allocation should be the mix of asset classes that promises the highest long-term expected investment return. There is therefore a need to examine investment behavior from the overall risky asset composition.
A Thesis submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the degree of Commonwealth Executive Master of Business Administration.