THE IMPLEMENTATION OF REGRESSION CROSS-SECTORAL ANALYSIS IN PORTFOLIO MANAGEMENT
THE IMPLEMENTATION OF REGRESSION CROSS-SECTORAL ANALYSIS IN PORTFOLIO MANAGEMENT

Summary/Abstract: The most important role of the financial system of a national economy is to ensure the smooth flow of funds between the groups of entities that operate within each national economy. These are, on the one hand, entities that have surplus financial resources and entities that lack those resources. In the last few decades, in all developed economic systems, the management of investment activities is mostly realized through portfolio management. The modern theory of portfolio management, unlike the traditional one which selected securities that best suit the profiles and wishes of investors, emphasizes the assessment of risk and return as well as the investor’s inclination towards risk. The development of information and telecommunication technology has greatly facilitated the management of the securities portfolio by increasing the amount of available information needed for quality decision-making and in order to, to some extent, reduce the level of investment risk. Regression cross-sectoral analysis, based on an extensive and complex statistical database and elaborate analytical tools and instruments, can greatly help investment decision makers, primarily portfolio managers, and point them in a timely manner, with a certain degree of probability, to possible directions for their future investment activities. Taking into account the scarce literature in the field of regression cross-sectoral analysis in portfolio management, it can be concluded that the holders of investment activities in making investment decisions rely more on their experience, intuition and theoretical knowledge and less on quantitative indicators and results of modern regression cross-sectoral analysis as well as on probability theories. The use of the results of regression cross-sectoral analysis in portfolio management should be a priority in future activities of those responsible for implementing an efficient and consistent investment policy, which ultimately necessarily reflects an increase in national wealth and brings higher economic growth.

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