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Different Variants of Fundamental Portfolio

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  • Tarczyński Waldemar

    (Szczecin University Faculty of Economics and Management Mickiewicza 64, 71-101 Szczecin, Poland)

Abstract

The paper proposes the fundamental portfolio of securities. This portfolio is an alternative for the classic Markowitz model, which combines fundamental analysis with portfolio analysis. The method’s main idea is based on the use of the TMAI1 synthetic measure and, in limiting conditions, the use of risk and the portfolio’s rate of return in the objective function. Different variants of fundamental portfolio have been considered under an empirical study. The effectiveness of the proposed solutions has been related to the classic portfolio constructed with the help of the Markowitz model and the WIG20 market index’s rate of return. All portfolios were constructed with data on rates of return for 2005. Their effectiveness in 2006- 2013 was then evaluated. The studied period comprises the end of the bull market, the 2007-2009 crisis, the 2010 bull market and the 2011 crisis. This allows for the evaluation of the solutions’ flexibility in various extreme situations. For the construction of the fundamental portfolio’s objective function and the TMAI, the study made use of financial and economic data on selected indicators retrieved from Notoria Serwis for 2005.

Suggested Citation

  • Tarczyński Waldemar, 2014. "Different Variants of Fundamental Portfolio," Folia Oeconomica Stetinensia, Sciendo, vol. 14(1), pages 1-16, June.
    • Handle: RePEc:vrs:foeste:v:14:y:2014:i:1:p:16:n:4
    DOI: 10.2478/foli-2014-0104
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    References listed on IDEAS

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    1. William F. Sharpe, 1963. "A Simplified Model for Portfolio Analysis," Management Science, INFORMS, vol. 9(2), pages 277-293, January.
    2. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    3. John Lintner, 1965. "Security Prices, Risk, And Maximal Gains From Diversification," Journal of Finance, American Finance Association, vol. 20(4), pages 587-615, December.
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