engleski

Analysis of Risk and Non-Linear Optimization - Example of the Croatian Stock Market Index

Amidst the time of crisis, business subjects are risk averse, waiting for better times and for the turmoil to calm down. Theories show that individuals are even ready to reject an investment that has a positive risk premium because the potential gain is insufficient to make up for the risk involved (Bodie, Kane, Marcus, 2008). By doing so, they prolong the crisis even longer. In such situations it is important to protect potential investors against further losses as it is the only thing that can serve as a guarantee of increased optimism that could lead to economic recovery. This paper thus focuses on problem of portfolio optimization of securities that make up the most relevant Croatian stock exchange index, namely Crobex 10. We analyze expected rates of return and portfolio risk and give recommendations to investors on how to choose optimal portfolio and minimize inherent risk.

risk ; stock market ; Croatia

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