Finances, accounting and audit

Examining the effectiveness of fundamental analysis in a long-term stock portfolio

Economic Annals-XXI

Economic Annals-ХХI: Volume 190, Issue 5-6(2), Pages: 119-127

Citation information:
Csesznik, Z., Gáspár, S., Thalmeiner, G., & Zéman, Z. (2021). Examining the effectiveness of fundamental analysis in a long-term stock portfolio. Economic Annals-XXI, 190(5-6(2)), 119-127. doi: https://doi.org/10.21003/ea.V190-11

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Zoltán Csesznik
PhD Student (Economics),
Institute of Business Regulation and Information Management,
Hungarian University of Agriculture and Life Sciences
1 Pater K. Str., Gödöllő, 2100, Hungary
csesznik@gmail.com
ORCID ID: https://orcid.org/0000-0003-4751-9662

Sándor Gáspár
PhD Student (Economics),
Institute of Business Regulation and Information Management,
Hungarian University of Agriculture and Life Sciences
1 Pater K. Str., Gödöllő, 2100, Hungary
gaspar.sandor.2@hallgato.uni-szie.hu
ORCID ID: https://orcid.org/0000-0002-6874-559X

Gergő Thalmeiner
PhD Student (Economics),
Institute of Business Regulation and Information Management,
Hungarian University of Agriculture and Life Sciences
1 Pater K. Str., Gödöllő, 2100, Hungary
thalmeiner.gergo@hallgato.uni-szie.hu
ORCID ID: https://orcid.org/0000-0002-7224-1028

Zoltán Zéman
D.Sc. (Economics), Professor,
Institute of Business Regulation and Information Management,
Hungarian University of Agriculture and Life Sciences
1 Pater K. Str., Gödöllő, 2100, Hungary
zeman.zoltan@uni-mate.hu
ORCID ID: https://orcid.org/0000-0003-2504-028X

Examining the effectiveness of fundamental analysis in a long-term stock portfolio

Abstract. Over the past decade, a number of modern and sophisticated methods have been developed to optimize the composition of equity portfolios. Most of these methods are based on complex mathematical or financial modelling. Less emphasis has been placed on companies’ internal data, while in recent years external data have become increasingly important. However, for long-term investments, the dominance of external data is not necessarily an efficient way to construct an appropriate portfolio. In this paper, we highlight the phenomenon that complex mathematical models, the based on simpler fundamental indicators can also be an efficient investment tool for in making investment decisions. Our results show that our hypothesis has been confirmed that some basic-based indicators can achieve alpha returns. Our analysis is based on financial reporting data in the form of various financial indicators. We used the S&P500 index as benchmark. A comparative analysis of the stock portfolio created illustrates that basic analysis can be more effective than a chosen market-based stock index. By the end of the period under review, the portfolio based on the selected five core financial indicators had a market capitalization 1.68% higher than the benchmark. The alpha return achieved also demonstrates that even simpler models can be efficient and effective in creating an equity portfolio.

Keywords: Portfolio Management; Fundamental Analysis; S&P500; Reports; Stock Market

JEL Classification: E47; F30; G11

Acknowledgements and Funding: The authors received no direct funding for this research.

Contribution: The authors contributed equally to this work.

Data Availability Statement: The dataset is available from the authors upon request.

DOI: https://doi.org/10.21003/ea.V190-11

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Received 7.04.2021
Received in revised form 12.05.2021
Accepted 22.05.2021
Available online 10.07.2021

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