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Portfolio Forming Decisions: The Role of Intangibles

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  • Marina A. Zavertiaeva

    () (National Research University Higher School of Economics)

Abstract

The purpose of this study is to present a tool to categorize companies as potentially profitable on the basis of an analysis of their intangibles. The paper distinguishes two crucial attributes for picking shares: intangibles and the capitalization of intangible-based growth potential in market indicators. By means of these attributes we create a portfolio from a sample of European companies and annually rebalance it. To test its attractiveness we compare it with benchmarks and random portfolios during the period from 2006 to 2013 using the Sharpe coefficient. The comparisons of the portfolio with the benchmarks demonstrate the importance of intangibles and the validity of the proposed tool. The Sharpe coefficient of the portfolio is significantly higher than the mean and median Sharpe ratio of random portfolios. The importance of intangibles for choosing an investment goal increases in crises. The paper contributes to the literature by identifying undervalued shares on the basis of the company’s intangibles and developing an algorithm to create an intangible-based investment portfolio

Suggested Citation

  • Marina A. Zavertiaeva, 2015. "Portfolio Forming Decisions: The Role of Intangibles," HSE Working papers WP BRP 44/FE/2015, National Research University Higher School of Economics.
  • Handle: RePEc:hig:wpaper:44/fe/2015
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    References listed on IDEAS

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    More about this item

    Keywords

    Intangibles; portfolio comparisons; Sharpe coefficient; benchmarking; growth potential;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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