Authors : Valeriy V. Davnis, Manya A. Ziroyan, Marina V. Vladika, Elena N. Kamyshanchenko and Viktoriya I. Tinyakova
Abstract: The study offers a new approach to building models of portfolio investments, in which the covariance matrix of Markowitz Model is replaced by a specially constructed matrix of additive interaction of financial assets. It is shown that additive interaction reflects more differentiated view on the situations that appears on the stock market than the multiplicative interaction which underlines the building of covariance matrix. Special regression models are constructed for the estimation of the additive interaction. With the help of these models the possible interaction options are defined. On the basis of the received options for each pair of assets a number of dependent variables are formed (which are corresponding to the regression models). The mathematical expectations of these models are considered as estimations of the additive interaction of the assets in the alleged situation and are used as the elements of the matrix of the Portfolio Investment Model. Empirical studies have confirmed the usefulness of the proposed approach in the problem of investment decisions in the stock market.
Valeriy V. Davnis, Manya A. Ziroyan, Marina V. Vladika, Elena N. Kamyshanchenko and Viktoriya I. Tinyakova, 2015. A Situational Model of Investment Portfolio. International Business Management, 9: 948-954.