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Risk Diversification on the Polish Capital Market

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  • Waldemar Tarczyński
  • Małgorzata Łuniewska

Abstract

The basics of portfolio management theory and methods of efficient selection of assets and their financing have been created by Markowitz and Sharpe. They propose that risk diversification consists, generally speaking, of the increase in the number of securities in a portfolio. So, authors try to answer the question of how many securities have to be bought on a given market to assure a well-diversified portfolio, where the increase in the number of securities does not lead to a significant decrease in portfolio risk. To evaluate such a purpose on the Polish capital market, 20 companies were surveyed that are included in the WIG20 index in the period January 2–October 10, 2001. The returns were estimated on a weekly basis. The research shows that a portfolio of securities constructed, according to the Sharpe Model, has a wide application to the Polish capital market. Copyright IAES 2006

Suggested Citation

  • Waldemar Tarczyński & Małgorzata Łuniewska, 2006. "Risk Diversification on the Polish Capital Market," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(3), pages 308-317, August.
    • Handle: RePEc:kap:iaecre:v:12:y:2006:i:3:p:308-317:10.1007/s11294-006-9019-1
    DOI: 10.1007/s11294-006-9019-1
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    References listed on IDEAS

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    1. John L. Evans & Stephen H. Archer, 1968. "Diversification And The Reduction Of Dispersion: An Empirical Analysis," Journal of Finance, American Finance Association, vol. 23(5), pages 761-767, December.
    2. Elton, Edwin J & Gruber, Martin J, 1977. "Risk Reduction and Portfolio Size: An Analytical Solution," The Journal of Business, University of Chicago Press, vol. 50(4), pages 415-437, October.
    3. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
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    Keywords

    C10;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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