The use of a beta coefficient on the Warsaw Stock Exchange - select approaches

The issue of the use of the beta coefficient for the capital market is very important because of the broad area in which it is applied. At the same time, new areas of application of this coefficient in the capital market are emerging. There are problematic and ambiguous issues of how to determine the coefficient, the length of the time series and the rate of return. It's areas of application are important, in particular its use in risk analysis (both portfolio and fundamental analysis). In the earlier work of the authors [Tarczynski 1994; Tarczynski, et al. 2004] the use of the beta coefficient was suggested when constructing the Taxonomic Measure of Attractiveness of Investment (TMAI). A very important issue is how the beta coefficient can be used for the capital market. It is especially good explore other areas or applications for its use. How the beta coefficient works in practice is also important.

The main goal of the article is an overview of selected applications of beta coefficient analysis for the capital market. An attempt is made to assess the utility of these applications for investment. These proposals include areas related to portfolio and fundamental analyses.

The study includes companies listed on the Warsaw Stock Exchange for the 2012-2014 period. Our research for selected companies demonstrates the use of beta coefficients in portfolio analysis. In particular it examines the usefulness of beta coefficient inter alia in: the structure of the securities portfolio, the construction of (TMAI), in constructing the Fundamental Power Index and the management of investment risk within the framework of fundamental analysis.