Does Portfolio Comprising of Solvent Companies Consistently Provide Robust Performance? An Empirical Analysis

32 Pages Posted: 29 May 2019

See all articles by Yasmin Pardawala

Yasmin Pardawala

Rizvi Institute of Management Studies and Research

Bhaskkar Sinha

Rizvi Institute of Management Studies and Research

Date Written: April 30, 2019

Abstract

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

Suggested Citation

Pardawala, Yasmin and Sinha, Bhaskkar, Does Portfolio Comprising of Solvent Companies Consistently Provide Robust Performance? An Empirical Analysis (April 30, 2019). Available at SSRN: https://ssrn.com/abstract=3380354 or http://dx.doi.org/10.2139/ssrn.3380354

Yasmin Pardawala (Contact Author)

Rizvi Institute of Management Studies and Research ( email )

New Rizvi Educational Complex
Off Carter Road,Bandra(West)
Mumbai, 400 050
India

Bhaskkar Sinha

Rizvi Institute of Management Studies and Research ( email )

off Carter Road
Bandra - west
Mumbai, 400050
India

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