MINIMIZING INVESTMENT RISK THROUGH DIVERSIFICATION OF SECURITIES PORTFOLIO
The process of building optimal diversified securities portfolio in order to minimize the investment risks was viewed in this article. During the research, the authors grounded that portfolio investment had be developed and popularized through investing in diversified investment portfolios. The work explores possibility of usage modern portfolio theory in Ukrainian stock market. The main goal of the article is working out the practical recommendations for usage modern portfolio theory in Ukraine. The optimal limitation for portfolio models were proposed in order to minimize the investment risks. The most popular portfolio modeling questions were discussed. The ways for risk-free asset and risk-free rate problem solution were found. The diversified investment portfolios were built by Markowitz model, Tobin model, Sharpe model, quasi Sharpe model. Both risk minimization and return maximization objective functions were used for the research. The general totality for diversification consisted of 33 securities, which turned on Ukrainian stock exchange. The general totality included only the most stable, liquid and regularly traded shares, which are both popular among private and institutional investors. After the selection, we got the sample of 23 shares. The sample was used for the further diversification. During the experiment, 8 investment portfolios of growth were built. The key theoretical measures of portfolio return and risk were calculated and compared by Markowitz model, Tobin model, Sharpe model, quasi Sharpe model in both cases portfolio risk minimization and portfolio return maximization. The investment portfolio estimations were based on the normal plot assumption. The monthly shares return for the period from 05.2012 to 06.2014. The investment horizon was a month. The optimization results in the form of portfolio structures were also compared with each other. The level of scientific and industrial portfolio diversification were analyzed. The theoretical portfolio results were compared with real monthly return by every model. The best model for usage in the current Ukrainian economic environment was selected according to results of the research.
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Keywords: Portfolio investment, security portfolio, investment portfolio, Markowitz model, Tobin model, Sharpe model, quasi Sharpe model, investment risks. |
THEORY
Neskorodeva Inna
Ph.D., assistant professor of finance Kharkiv National Economic University. S. Kuznets
Garnat Denys
Chief analyst «Atilog LTD»
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