Efficiency of Investment with the Use of Fundamental Power Aspects

Abstract

The study fits well with the behavioral aspects of investment decisions. In this scope, a special place occupies risk aversion and associated with this possibility of building strategies using a variety of techniques and methods. The final effect such an action is selection the way of investment and to take the investment decision. The chapter proposes the fundamental portfolio of securities. This portfolio is an alternative for the classic Markowitz model, which combines fundamental analysis with portfolio analysis. The method’s main idea is based on the use of the TMAI synthetic measure and, in limiting conditions, the use of risk and the portfolio’s rate of return in the objective function. Procedure for calculating TMAI is presented e.g. in (Tarczyński, Przegląd Statystyczny 3:275–300, 1994). 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 return. All portfolios were constructed with data on rates of return for 2005. Their effectiveness in years 2006–2016 was then evaluated. 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.