ANALYSIS OF AN INFLUENCE OF THE RISK MEASUREMENT APPROACH ON THE COMPOSITION OF AN INVESTMENT PORTFOLIO MADE BY REDUCED MARKOWITZ MODEL

One of the most important criteria in a portfolio making is the risk associated with the investment. Risk can be measured from historical returns of the investment instruments in several ways (variance, semivariance, standard deviation, average absolute negative deviation, etc.). Each measure looks at the risk from the perspective of another characteristic; it has its informative value. Then it seems that a choice of the risk measurement approach should influence the composition of a portfolio. But is it generally really so? Are not there cases where this does not apply? Answers these questions are notable for real investment decision making because a choice of the "right" risk measure can be very difficult task. In case of no influence, the portfolio selection process becomes easier. To analyze this effect, a methodical approach based on the Markowitz model is proposed. The effect is studied from a few perspectives, namely investment horizon and kind of specified investment instruments (unit trusts). This complex analysis of influence of a risk measure on the portfolio composition is being performed on the case of open unit trusts offered by Ceska sporitelna.