Does Portfolio Comprising of Solvent Companies Consistently Provide Robust Performance? An Empirical Analysis
32 Pages Posted: 29 May 2019
Date Written: April 30, 2019
This paper talks about identifying firms which are easily prone to bankruptcy and avoids including such stocks in the stock portfolio. The importance of risk, returns, profitability, value and growth strategies while creating a portfolio are highlighted in this paper. The univariate Z-Score and asset size are used for separating investible stocks from non-investible stocks. The performance of such a portfolio is tested over a time period for its robustness. The allocation of weights is done on the basis of market cap i.e. large cap is given a weight of 65% to 97% and the mid-cap is given a weight of 3% to 35%. This allocation is helpful for arriving at the number of shares to be purchased.
Keywords: Altman Z-Score, CAPM, Profitability, Risk-Reward Relationship
JEL Classification: G11, G12, G15
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