Performance of Risk Measures in Portfolio Construction on Central and South-East European Emerging Markets

摘要

Aim of this paper is to characterize different risk measures in portfolio construction on seven Central and South-East European stock markets;Slovenia, Croatia, Hungary, Poland, Chez Republic, Bulgaria and Romania. Selected countries are members of EU, except Croatia and Turkey which have candidate status. Empirical part of this paper consists of three stages;at first descriptive statistic on stock returns was performed, afterwards different risk measures were employed in portfolio construction and in the last part, portfolios were tested in the out-of-sample period. Results indicate presence of extreme kurtosis and skewness in stock return series. Resulting portfolios incorporate stocks with extremely high kurtosis and stocks with negative skewness. Portfolio construction based only on risk and return results in major exposure to extreme returns and unsatisfactory portfolio out of sample results.