The main goal of the paper is presentation of theoretical aspects in construction of fundamental power index (FPI). Its construction is a result of horizontal and vertical risk diversification development and wider usage methods of fundamental analysis and statistical methods too. The FPI can be an alternative measure of investment attractiveness analysis for stock companies. The construction of FPI require:
- description of data set which contain diagnostic variables – its including: analysis of qualitative and quantitative factors (variables) and its essential connection with fundamental power of the company, statistical analysis of variables (a very important is quality of data set in statistical point of view), selection of variables with using some of multivariate methods
- construction of FPI – this step is connected with usage of FPI in practice e.g. portfolio analysis and risk diversification, fundamental analysis and description of internal value.
It is not possible to construct the one universal FPI, because it depend on situation of its usage.
In practical part of the paper is presented construction of FPI for companies listed on WSE and its usage for investment.
Jel: G11, G32, C38
Key words: Portfolio and fundamental analysis, security selection, long term investment; investment strategies, risk management, risk diversification, multivariate methods, fundamental power of the company, fundamental stability