Naslov
Application of Luenberger shortage function on the Zagreb Stock Exchange: analysis of efficient market portfolio

Autori
Škrinjarić, Tihana ; Zoričić, Davor ; Dolinar, Denis

Izvornik
Croatian operational research review (1848-0225) 9 (2018), 2; 183-197

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
efficient market portfolio ; Croatian stock market ; shortage function ; efficient frontier

Sažetak
In order to apply the CAPM in practice, the estimation of the market portfolio presents one of the biggest challenges. Even more so after the research in early 1990s pointed out the mean-variance inefficiency of stock market capitalization-weighted indices. In the paper we perform in-sample optimization for the CROBEX index constituents to test its efficiency ex post. Selected CROBEX index revisions in the period March 2005 – September 2017 are analysed. We find the index to be inefficient which confirms results of earlier studies. However, since mean-variance optimization often yields extreme portfolio weights thus reducing the effective number of stocks in portfolio, the focus of this research is on testing if improvement in efficiency over the CROBEX index is possible with respect to the portfolio deconcentration level. The Luenberger’s shortage function is added to optimization algorithm in order to increase the number of efficient portfolios analysed.

Izvorni jezik
Engleski

Znanstvena područja
Matematika, Ekonomija

POVEZANOST RADA