INCORPORATING THE FUNDAMENTAL ANALYSIS INTO THE ROBUST MEAN – VARIANCE ANALYSIS: AN APPLICATION ON THE TURKISH BANKING STOCKS

Abstract

Robust optimization is an important tool to deal with the uncertainty of parameters. However, due to the worst-case orientation, the existing robust mean – variance (MV) models ignore the plausible portfolio choices, backed by additional criteria or subjective judgements. Thus, we propose a way to incorporate the fundamental analysis into the robust MV analysis under the assumption that the risk-free asset and short positioning are allowed. After laying down the theoretical points, we give an explanatory example by using the real data set of six banking stocks trading on the Borsa Istanbul (BIST).

Keywords

• Portfolio selection
• fundamental analysis
• principal components analysis
• robust optimization
• mean - variance model

Project Number

Yok

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