ESTIMATION OF EFFICIENT BENCHMARK PORTFOLIO FOR THE EASTERN EUROPEAN MARKET

Authors

  • Marta Tušek Faculty of Economics & Business in Zagreb
  • Davor Zoričić Faculty of Economics & Business in Zagreb
  • Denis Dolinar Faculty of Economics & Business in Zagreb
  • Zrinka Lovretin Golubić Faculty of Economics & Business in Zagreb
  • Zrinka Orlović Faculty of Economics & Business in Zagreb

DOI:

https://doi.org/10.51680/ev.37.1.1

Keywords:

Efficient portfolio estimation , risk-reward ratio , diversification strategies , “smart” beta, the CECE Composite Index

Abstract

Purpose: This paper explores the mean-variance inefficiency of cap-weighted indices based on the CECE index as a benchmark.
Methodology: For the period from March 2014 to September 2021, several proxies of efficient portfolios were estimated: the Global Minimum Variance (GMV) portfolio, the Maximum Sharpe Ratio (MSR) portfolio and the portfolio with equal weights of constituents (EW). Diversification of strategies was also considered by analyzing the performance of a portfolio consisting of GMV and MSR that were weighted equally. Based on monthly data, 90 out-of-sample estimations were made for each strategy in order to compare their risk-return characteristics. Furthermore, to confirm the differences in the riskiness and returns of the estimated portfolios, the F-test and the Welch test were performed, respectively.
Results: The results show that all analyzed portfolios achieved superior performance compared to the CECE index with the GMV portfolio leading the way.
Conclusion: Research findings highlight the importance of market development and liquidity when pursuing popular scientific diversification methods.

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Published

2024-06-17

How to Cite

Tušek, M., Zoričić, D. ., Dolinar, D. ., Lovretin Golubić, Z., & Orlović, Z. (2024). ESTIMATION OF EFFICIENT BENCHMARK PORTFOLIO FOR THE EASTERN EUROPEAN MARKET. Ekonomski vjesnik/Econviews - Review of Contemporary Business, Entrepreneurship and Economic Issues, 37(1), 1–9. https://doi.org/10.51680/ev.37.1.1

Issue

Vol. 37 No. 1 (2024)

Section

ORIGINAL SCIENTIFIC ARTICLE

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