[01] Lam Weng Siew, Department of Physical and Mathematical Science, Faculty of Science, Universiti Tunku Abdul Rahman, Kampar Campus, Kampar, Perak, Malaysia; Centre for Mathematical Sciences, Centre for Business and Management, Universiti Tunku Abdul Rahman, Kampar Campus, Kampar, Perak, Malaysia. [02] Lam Weng Hoe, Department of Physical and Mathematical Science, Faculty of Science, Universiti Tunku Abdul Rahman, Kampar Campus, Kampar, Perak, Malaysia; Centre for Mathematical Sciences, Centre for Business and Management, Universiti Tunku Abdul Rahman, Kampar Campus, Kampar, Perak, Malaysia.

In portfolio management, the fund managers and investors desire to determine the optimal portfolio that can generate higher return at the minimum risk. Enhanced index tracking is a popular type of portfolio management which aims to construct the optimal portfolio in order to generate higher portfolio mean return than the benchmark index mean return. The fund managers can achieve this purpose by using the optimization model as a decision-making tool. The objective of this paper is to apply the optimization model with weighted approach in constructing the optimal portfolio to track the Technology Index in Malaysia. In this study, the data consists of weekly return of the companies from technology sector in Malaysia Main Market. The results of this study indicate that the optimal portfolio is able to outperform Technology Index by generating weekly excess mean return 0.3168% at minimum tracking error 1.8282%. The significance of this study is to identify and apply the optimization model with weighted approach as a strategic decision-making tool for the fund managers to track the benchmark Technology Index effectively in Malaysia stock market.

Weighted Model, Enhanced Index Tracking, Non-Linear Programming, Optimal Portfolio, Mean Return, Tracking Error

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