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2013, vol. 6, iss. 3, pp. 1-17
The application of portfolio techniques to company operations in stock markets
Naftna industrija Srbije, Novi Sad

emailjelena_brdar@yahoo.com
Abstract
Financial market is a complex, non-linear and non-stationary dynamic system and as such requires advanced analysis techniques. To reduce financial risk, investors must develop a portfolio to allocate investment into a set of different assets. In this paper we describe the Markowitz portfolio theory and compare it to a new approach that relies on predictive modeling of stock market prices. The main weaknesses of the Markowitz portfolio theory are presented along with possible suggestions for overcoming them. We also explored the possibility of incorporating data mining techniques into the creation of an optimal portfolio of securities. We especially experimented with neural networks that have been extensively used in the investment decision-making processes. Experimental data were obtained from Google Finance and they include daily changes in stock prices of 20 companies in the interval of10 years. The obtained results show that the new portfolio method based on neural networks is promising and brings a high return on investment.
References
*** (2013) Stock market quotes. Google Finance. http://www.google.com/finance
Alihodžić, A. (2010) Moderna portfolio teorija i diversifikacija. Bankarstvo, vol. 39, br. 11-12, str. 62-77
Freitas, F.D., de Souza, A.F., de Almeida, A.R. (2009) Prediction-based portfolio optimization model using neural networks. Neurocomputing, 72(10-12): 2155-2170
Markowitz, H. (1952) Portfolio selection. Journal of Finance, 7(1): 77-91
Markowitz, H.M. (1991) Foundations of Portfolio Theory. Journal of Finance, 46(2): 469-477
Milosavljević, M. (2005) Neuronske mreže - radni material. Beograd: Elektrotehnički fakultet
van Horne, J.C. (1995) Finansijsko upravljanje i politika. Zagreb: MATE
Vunjak, N., Ćurčić, U., Kovačević, L. (2008) Korporativno i investiciono bankarstvo. Bečej: Proleter
Williams, J.B. (1938) The theory of investment value. Cambridge, MA, itd: Harvard University Press, str. 55-75
 

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article language: Serbian
document type: Original Scientific Paper
published in SCIndeks: 07/11/2013

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