An implementation of fundamental forces in economic practice - selected issues

The analysis of securities with usefulinformation about fundamental power can be an essential element of investment. Methods of fundamental analysis (particularly indicator analysis) are more useful for long-term investment.

Sources for the definition of "fundamental power" can be found in the financial analysis. Benjamin Graham can be considered as the founder of this concept and the one who implemented it in practice. As a precursor of financial and fundamental analysis, in his investment activities and analyses, he related very strongly aspects of the economic and financial condition of companies.

These elements were considered in the context of the long-term attractiveness of investment in the company. The concept of "fundamental strength" (or "fundamental power") naturally evolved over time. In short, "fundamental power" in a synthetic way describes the financial and economic condition of the company and its position in the sector or market. But it must be said that for "fundamental strength" two things are important: factors which create fundamental power, and the manner of measurement – in this area can be used one of the fundamental power indices (FPI). Fundamental power especially the FPI can have many practical uses in assessing companies, sectors or markets.

The main goal of the paper is to indicate areas for implementation of the FPI in economic practice. Implementation is supported by empirical examples of usefulness for the FPI. The FPI is constructed using static and dynamic approaches. These approaches differ by whether changes over time are factored in or not.

In the research, financial and economic data were used for the companies listed on Warsaw Stock Exchange from 2010 – 2014.