An analytical method for construction of a fundamental portfolio

Abstract

The classical models used for the construction of an investment portfolio do not take into account the fundamental values of the companies in question. The model of a fundamental portfolio adds this dimension to the classical criteria of profitability and risk. It is assumed that an investor selects stocks according to their attractiveness measured by some fundamental values of companies. In the paper the authors propose an analytical solution of the optimization problem of constructing a fundamental portfolio and present empirical examples of the calculation of fundamental portfolios of stocks listed on the Warsaw Stock Exchange.

Portfolio Choice With a Fundamental Criterion – An Algorithm and Practical Applicationon – A Computation Methods and Empirical Analysis

“…The portfolio constructed with the use of TMAI was called a fundamental portfolio. The analytical solution of this model was given by Kliber and Rutkowska-Ziarko (2018). This model has been modified in recent years, for example by substituting variance with semi-variance as a risk measure (Rutkowska-Ziarko and Garsztka 2014).…”