BULGARIAN STOCK EXCHANGE

Bulgarian Stock Exchange

Bulgarian Stock Exchange

Abstract

The plan of the proposal is to reveal the main way that will underpin the prospect thesis development. Though, the following dissertation will not be supported only on the presented process below. The main basis though, is to build the efficient frontier of equity portfolios founded on the Modern portfolio theory. Modern Portfolio Theory associates the stock market risk with volatility of the return. Volatility is measured by the variance of return but the investment community does not accepted this measure, since it weighs equally the deviations of the average return, while most investors determine the risk on the basis of small or negative returns. In the last decade the measure Value at Risk (VaR) has established itself in the practice. It is a part of the New Basel Accord. Value-at-Risk is defined as the maximum expected loss for a given horizon in specified confidence level. The issue about modelling and forecasting thin emerging stock markets risk is still open. The aim of the paper is to give the investment community a model for assessment and forecasting of the Bulgarian stock market risk. In the Bulgarian stock market, there are no limits on foreign trading. For metthodology section, Methods are Simplifying the portfolio selection procedure. There is no ceiling on foreign possession for companies established under Law no. 159 for 1981 as adjusted by Law no.3 for 1998. In addition, it is no longer necessary that the majority of board members be Bulgarians. Capital gains taxes and taxes on dividends, were removed. There are no taxes on the repatriation of profits and foreigners are authorized to repatriate profits at any time. We believe the official stock market index of Bulgarian Stock Exchange - Sofia. We inspect the daily returns of the SOFIX index over the period 24 October 2001 - 14 November 2003. The data is given by Bulgarian Stock Exchange.

Table of content

Abstract2

Chapter II4

Literature Review4

Mathematically15

Capital allocation line17

Systematic risk and specific risk20

Capital asset pricing model22

Securities market line23

Chapter III25

Methodology25

Methods27

Simplifying the portfolio selection process27

Inputs to portfolio analysis28

Empirical Results29

Summary34

References35

Chapter II

Literature Review

There are numerous studies on new stock markets that the plan different characteristics of emerging capital markets. In fact emerging markets is very abnormal. In addition, seventeen out of twenty stock Exhibition markets positive bias in earnings, and nineteen out of twenty are leptokurtic for the study period April 1987-March 1997. In addition, there there is no conclusive evidence that non-normality is found in many emerging market returns become less prominent place in the 1990's. The correlation varies depending on how the economy and the state of the stock market in each country. (Engle and Sheppard, 2001 Engle, R., Sheppard, K., 2001, 762-78)

The correlation is higher in periods of economic downturn and lower in restored compared with the average correlation during both economic states. In addition, the same asymmetry observed correlation in bear and bull markets: in bear markets, higher correlation coefficients, and correlation coefficients Bull markets ...