The method for detecting the leading sector on the Warsaw Stock Exchange

Capital market development is initiated by many factors of a different nature and direction of impact. The development of the stock market which is a strict element of the capital market also occurs as a result of the impact of many factors. Increases in, decreases in, and the stagnation of prices of financial instruments traded in the stock exchange are a derivative of both the attitudes and expectations of market participants, but economic and financial conditions and the situation of sectors forming it also shape the picture of the market. Knowledge of the market as a whole, processes and trends regarding changes that occur or might occur are synonymous with the necessity for expertise in this market at different levels of aggregation: megasectors, sectors, individual market players.

At the sectoral level, it can be assumed that the level of economic and financial development of the sector, shaping the economic and stock market conditions is a derivative of the level of development and market condition of economic entities included in its composition. The question therefore arises whether you can identify the key features of development sectors, which consequently determine the development of the stock market or the wider economy, and whether these same features apply to the different types/kinds of sectors.

Also important is the ability to identify sectors and leading companies that make up the stock market. This approach is important for several reasons. One of them is the investment process. Information about the leading sector can be a key factor in the success of investment activities that are undertaken. In particular, this relates to the process of investing methods of fundamental analysis and/or portfolio.

The purpose of the paper is therefore to identify the leading sectors of the stock market. The research was conducted for the Warsaw Stock Exchange in the 2010-2014 period. In the analysis, the information on fundamental factors which may affect the strength of fundamental sectors and companies included in its composition also takes into account the market factors, concerning, among others shaping changes of rates of return from shares in sectors of the market and sector indices. The adoption of these types of factors is important from the point of view of the essence of our audit.