Risk analysis of capital investments on the Warsaw Stock Exchange in the context of the portfolio theory

摘要

The main aim of the paper was to analyze the risk connected with capital investments on the Warsaw Exchange Stock, in the years 1995-1999. The analysis was made on the basis of the classical portfolio theory, published for the first time by H. Markowitz. This theory enabled to show the effect of investment diversification into numerous assets, resulting in the reduction of the total investment risk. The paper describes briefly the essence of risk, its types and causes, presents the portfolio theoryand explains the terms related to the investment risk. In order to determine the level of risk and its decomposition into two main components: specific risk and systematic risk, uniform portfolios were used in the study, from 2-element to 100-element ones. Portfolio investments were also examined from the perspective of their profitability in the research period and distribution normality for the rates of return on the securities quoted and portfolios. The distribution normality of the expected rates of return on both individual securities and portfolios allows to analyze them taking into consideration two characteristics: the expected rate of return and standard deviation. The results obtained indicate that in the period studied investments were characterized by favorable profitability, which used to rise up to a given level with an increase in the number of securities in the portfolio. The total portfolio risk decreases as a result of expanding the allocation by new assets, and - compared with therisk connected with single securities - constitutes its much smaller part. The highest risk reduction may be observed in the case of portfolios consisting of several securities. Adding new securities to the portfolio leads to a slighter and slighter decrease in risk.