PORTFOLIO OPTIMIZATION ON CROATIAN CAPITAL MARKET

Zoran Ivanovic, Suzana Baresa and Sinisa Bogdan

UTMS Journal of Economics, 2013, vol. 4, issue 3, 269-282

Abstract: Purpose of this paper was to research portfolio optimization problem on Croatian capital market using Markowitz theory. Research systematically investigated the selection of securities, and defined the importance of using fundamental analysis when selecting the best combination of securities. Since fundamental analysis involves a large number of indicators, this paper selected key indicators that enable a complete and quick securities review on the market. This paper clarifies diversification effect and influence of the correlation coefficient on diversification. Two basic types of assets (stocks and cash funds) have been chosen to build the optimal portfolio. Cash funds were selected because they represent a form of risk-free investment, while stocks were chosen because of the high level of return which they achieve. At the end of paper, optimal portfolio was calculated with an excellent yield of 1.82% and deviation of 5.77% on a monthly basis which corresponds to the minimum deviation of the selected stocks. Calculated optimal portfolio achieves better expected value than investing in stock index CROBEX, which for the same period achieves the expected result of -0.02%.

Keywords: optimal portfolio; diversification; asset allocation; stock; cash fund; risk; fundamental analysis (search for similar items in EconPapers)
JEL-codes: C61 G11 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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