The construction of fundamental portfolio with the use of multivariate approach

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Abstract

The paper proposes the fundamental portfolio of securitieS. This portfolio is an alternative to the classic Markowitz model, which combines fundamental analysis with portfolio analysiS. The method's main idea is based on the use of the TMAI [1] synthetic measure and, in limited 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 empirical study. The effectiveness of the proposed solutions has been related to the classis portfolio constructed with the help of the Markowitz model and the WIG20 market index's rate of re-turn. All portfolios were constructed with data on rates of return for 2005. Their effectiveness in years 2006-2017 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.

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Tarczyński, W., & Tarczyńska-ŁUniewska, M. (2018). The construction of fundamental portfolio with the use of multivariate approach. In Procedia Computer Science (Vol. 126, pp. 2085–2096). Elsevier B.V. https://doi.org/10.1016/j.procS.2018.07.243

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