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Jordanian infrastructure sub-index returns and optimal portfolio selection

Omar Gharaibeh

Industry professional and institutional investors want to understand return behaviour and portfolio attributes of infrastructure investment. However, there are limited empirical analyses that support these investments. The scarcity of infrastructure research motivates this study to apply finance theory to this investment. In this paper by collecting monthly Jordanian infrastructure sub-index returns over the period from January 2010 to February 2017, we address two objectives. The first objective is to examine the importance of listed infrastructure sectors by evaluating the investment characteristics as well as performance of various infrastructure subindexes in Jordan. Second, this paper investigates the strategy of infrastructure investors. That is, if the investor obtains diversification benefits by investing in a portfolio including various infrastructure sub-indexes or invests in only a single infrastructure sub-indexes. The results of this study find that Jordanian infrastructure sub-indexes perform differently and provide dissimilarity in monthly returns and volatilities. The current study finds that listed infrastructure sub-indexes are strongly related to general stock market while weakly related to bonds. This study also shows that some infrastructure sub-indexes such as Health Care and Educational Sub-indexes dominate optimal portfolio selection while others such as Hotels and Transportation Sub-indexes are undesirable. This paper presents a first light of Jordanian infrastructure returns and provides the foundation for the evaluation of infrastructure in other countries.