Naslov
Towards the Estimation of an Efficient Benchmark Portfolio: The Case of Croatian Emerging Market

Autori
Dolinar, Denis ; Zoričić, Davor ; Kožul, Antonija

Izvornik
Zagreb International Review of Economics (1331-5609) 20 (2017), Special Conference Issue, April 2017; 13-24

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, prethodno priopćenje, znanstveni

Ključne riječi
efficient benchmark ; cap-weighted indices ; risk-return trade-off ; undeveloped and illiquid markets

Sažetak
The fact that cap-weighted indices provide an inefficient risk-return trade-off is well known today. Various research approaches evolved suggesting alternative to cap-weighting in an effort to come up with a more efficient market index benchmark. In this paper we aim to use such an approach and focus on the Croatian capital market. We apply statistical shrinkage method suggested by Ledoit and Wolf (2004) to estimate the covariance matrix and follow the work of Amenc et al. (2011) to obtain estimates of expected returns that rely on risk-return trade-off. Empirical findings for the proposed portfolio optimization include out-of-sample and robustness testing. This way we compare the performance of the capital-weighted benchmark to the alternative and ensure that consistency is achieved in different volatility environments. Research findings do not seem to support relevant research results for the developed markets but rather complement earlier research (Zoričić et al., 2014).

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA