Naslov
Towards the estimation of an efficient benchmark portfolio: A case of Croatian emerging market

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

Vrsta, podvrsta i kategorija rada
Radovi u zbornicima skupova, cjeloviti rad (in extenso), znanstveni

Izvornik
1st International Conference on Financial Analysis / - , 2016

Skup
1st International Conference on Financial Analysis

Mjesto i datum
Dubrovnik, Hrvatska, 01.06.2016. - 03.06.2016

Vrsta sudjelovanja
Predavanje

Vrsta recenzije
Međunarodna recenzija

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. A large body of literature emerged in the last two decades based on early evidence provided in research by Haugen and Baker [5] and Grinold [4]. Various research approaches evolved in the field of portfolio management suggesting alternative to cap-weighting in an effort to come up with a more efficient market index benchmark which could outperform cap- weighting. In this paper we aim to use such an approach. We apply statistical shrinkage method suggested by Ledoit and Wolf [6] to estimate the covariance matrix and follow the work of Amenc et al. [2] to obtain estimates of expected returns that rely on risk/reward tradeoff. Empirical findings for the proposed portfolio optimization include out-of-sample and robustness testing. Former is undertaken in order to compare the performance of the capital-weighted benchmark to the alternative and the latter in order to ensure that consistency in estimation is achieved in different (high/low) volatility environments. Research findings do not seem to support relevant research results for the developed markets but rather complement earlier research undertaken by Zoričić et al. [11] that also focused on the Croatian capital market. Therefore, a lot of further research lies ahead in terms of applying the advances in efficient benchmark estimation to the undeveloped and illiquid financial markets.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA