Improving market risk estimation in diagonal model of Sharpe

Abstract

Purpose: The development of mathematical apparatus of security portfolio building due to specification of the mechanisms and the nature of market risk occurrence in the models of portfolio decisions. Discussion: Authors prove the usage of profitability of a group index for mechanisms specification and specification of the mechanisms and the nature of market risk occurrence in the process of making of portfolio decisions received by means of diagonal model of Sharpe. The using of a special tool variable is offered as profitability of a group index in practical calculations. Ways of its formation are discussed. Results: the modification of diagonal model with use of the corrected assessment of market risk is developed by authors on the basis of econometric approach. The detailed derivation of formulas needed for this purpose is considered and their substantial interpretation is given. The practical importance of research is defined by the results of empirical calculations given in article. They didn't disprove the assumption that use of the developed models in the asset management significantly increases probability of positive financial result receiving by the investor on the anticipatory period.