APPLICATION OF MARKET VALUATION MODELS IN PORTFOLIO MANAGEMENT

Damian Pastor (), Pavel Kisela (), Viliam Kovac (), Tomas Sabol () and Viliam Vajda ()
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Damian Pastor: Technical University of Košice, Faculty of Economics
Pavel Kisela: Technical University of Košice, Faculty of Economics
Viliam Kovac: Technical University of Košice, Faculty of Economics
Tomas Sabol: Technical University of Košice, Faculty of Economics
Viliam Vajda: Technical University of Košice, Faculty of Economics

Polish Journal of Management Studies, 2015, vol. 12, issue 1, 154-165

Abstract: The paper deals with application of market valuation models in portfolio management. Its aim is to find out if it is possible to gain excess returns with simple investment strategies based on indicators constructed from some well-known ratios that are used to detect undervaluation or overvaluation of stock market. The theoretical background is followed by an overview of other studies in this field. In the next chapter Tregler’s market valuation indicators and the created investment strategies are discussed. Portfolio management approaches for different indicators were tested on historical S&P 500 monthly close prices. Any of chosen approaches was not able to achieve a higher return than basic buy and hold strategy. One strategy achieved return comparable to benchmark, but with lower risk, so it may be suitable for some portfolio managers.

Keywords: valuation indicators; market valuation; portfolio management; investment strategies; efficiency market hypothesis; undervaluation; overvaluation (search for similar items in EconPapers)
Date: 2015
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