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Measuring Dynamics of Risk and Performance of Sector Indices on Zagreb Stock Exchange

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  • Škrinjarić Tihana

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

Abstract

Investors are interested in sector diversification on stock markets among other important portfolio topics. This paper looks at five sector indices on Croatian capital market as an example of a small, relatively illiquid market. Sector indices have been constructed at the beginning of 2013 and since then there is a lack of studies, which focus on sector diversification on Zagreb Stock Exchange (ZSE). Thus, the purpose of this paper is to evaluate the recent dynamics of risk and performance of five sector indices on ZSE by employing MGARCH (Multivariate Generalized Autoregressive Conditional Heteroskedasticity) models empirically. Output from the analysis is used to form guidance for investors on Croatian capital market. The results indicate that in the observed period from February 4th 2013 to October 13th 2015 portfolios based on MGARCH methodology outperform other portfolios in terms return and risk. Thus, it is advisable to use this methodology when making portfolio selection.

Suggested Citation

  • Škrinjarić Tihana, 2015. "Measuring Dynamics of Risk and Performance of Sector Indices on Zagreb Stock Exchange," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 1(1-2), pages 27-41, December.
    • Handle: RePEc:vrs:crebss:v:1:y:2015:i:1-2:p:27-41:n:3
    DOI: 10.1515/crebss-2016-0003
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    References listed on IDEAS

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    More about this item

    Keywords

    MGARCH; Croatian capital market; time varying risk; beta; performance measurement;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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