Vol 4 Issue 3 September 2017-December 2017
W. G. S. Konarasinghe
Abstract: Scientific forecasting depends on mathematical modelling and statistical modelling. Mathematical models are deterministic, therefore mathematical models are unable to capture the uncertainty in real life. Statistics is known as mathematics of uncertainty. Statistical models contain the randomness; therefore statistical models have become more prominent in forecasting. The theory of Uniform Circular Motion introduced several mathematical models to describe the motion of a particle in a horizontal or vertical circle. These models were extensively used in the fields of Physics and Engineering, but rarely in the fields of Economics, Finance, and Management etc. Yet, in recent past, the theory of Uniform Circular Motion was incorporated with Statistics in forecasting risk and return of Sri Lankan share market. The models developed to measure the return and risk were named as; Circular Model (CM) and Circular Indicator (CI) respectively. Share trading is important to the investors, industries as well as the entire economy of a country. In general, share market investments are high return, but high risk too. A portfolio is a combination of risky assets, which is deem to minimize the risk and maximize the profit. In modern portfolio theory, total risk of a portfolio is measured by the variance, but the variance is not a suitable measurement for time series data, as they are not independent. This study was focused on combining the CM and CI to develop a Statistical Indicator to give useful information to investors in portfolio selections. Suggested Indicator; named as Coefficient of Stability (CoS) was tested on Sri Lankan share market.
Keywords: Circular model, Circular Indicator, Mathematical Modelling, Statistical Modelling.
Title: THEORY OF UNIFORM CIRCULAR MOTION IN PORTFOLIO SELECTION
Author: W. G. S. Konarasinghe
ISSN 2394-9651
International Journal of Novel Research in Physics Chemistry & Mathematics
Novelty Journals