Browsing by Subject "stocks"

This study examines the impact of forest industry securities on the portfolio risk in the frame of portfolio theory, and performs comparison of international forest industry enterprises as investment objects by using methods of fundamental analysis. During the past decade the global balance of forest industry has been shifting. While the demand for forest industry products in Western countries has been declining, the total demand for forest industry products on the global level has been growing. The growth of total demand has been generated by emerging markets. In Finland forest industry has been considered as a steady industry sector, which has been rewarding investors with stable profits. The previous researches show that compared to the average risk of securities, forest industry securities tend to have a lower risk. The objective of this study is to examine the geographical diversification of forest industry securities and its benefits to the risk in a Finnish stock portfolio between 2003 and 2013. The theoretical framework of this study includes portfolio theory and fundamental analysis. The principal aim of portfolio theory is to maximize expected return for a given amount of risk, or equivalently minimize risk for a given level of expected return. The risk is interpreted as variance of portfolio expected returns. By choosing securities which have only very little correlation with each other we obtain the best diversification benefits, hence minimize portfolio risk. Fundamental analysis provided key indicators for analyzing economic preconditions of the companies which reflected efficiency, solvency and market liquidity. The portfolio risk was calculated from a market portfolio, which included forest industry securities from five alternative countries; Finland, Germany, USA, Latin America, China. After including the securities to the portfolio their weight was optimized. The market portfolio was represented by OMXH CAP -return index as it consists of a weighted sum of every asset traded at Helsinki Stock Exchange, hence is perfectly diversified portfolio. The results showed that in the geographical comparison the German forest industry stocks provided the best diversification benefits. Including German forest industry stocks to a Finnish market portfolio decreased portfolio risk by 2.77 %, where the forest industry stocks of other countries where able to decrease portfolio risk less than 1 %. Compared to other countries, German forest industry stocks had the smallest correlation with OMXH CAP -return index. Performing fundamental analysis of forest industry companies on a country level did no provide explicit results what comes to the investment attractiveness as financial key indicators of companies had considerable fluctuation within a country.