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Rolling Regression Capm On Zagreb Stock Exchange - Can Investors Profit From It?

Author

Listed:
  • Tihana Skrinjaric

    (Faculty of Economics and Business, University of Zagreb, Croatia)

Abstract

This paper explores possibilities of using rolling regression CAPM on the Zagreb Stock Exchange in portfolio and risk management. Since original model has many flaws, one of them including the assumption of constant parameters in the model, extending the model with the assumption of changing parameters over time could lead to better results regarding portfolio risk and return. Furthermore, the rolling regression approach to CAPM estimation has not yet been observed on the Croatian and similar CEE markets, to the knowledge of the author. Weekly data on five sector indices from Zagreb Stock Exchange and the market index CROBEX with 91 day T-bill rates have been used for the period January 2012 - April 2018 in order to evaluate rolling regression CAPM on the Croatian market. Results from the analysis are used in simulating portfolio strategies in order to evaluate their performance regarding risk and return. Results indicate that such trading strategies could lead to better portfolio risk and return characteristics compared to the CROBEX benchmark, with the inclusion of transaction costs as well.

Suggested Citation

  • Tihana Skrinjaric, 2018. "Rolling Regression Capm On Zagreb Stock Exchange - Can Investors Profit From It?," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 16(2), pages 7-22, November.
    • Handle: RePEc:tuz:journl:v:16:y:2018:i:2:p:7-22
    as

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    References listed on IDEAS

    as
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    3. Basu, S, 1977. "Investment Performance of Common Stocks in Relation to Their Price-Earnings Ratios: A Test of the Efficient Market Hypothesis," Journal of Finance, American Finance Association, vol. 32(3), pages 663-682, June.
    4. Chen, Nai-Fu, 1991. "Financial Investment Opportunities and the Macroeconomy," Journal of Finance, American Finance Association, vol. 46(2), pages 529-554, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    asset pricing; rolling regression; risk hedging;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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