Portfolio Creation Based on Valuable Financial Criteria: An Analysis on the BIST Artificial Index

Abstract

EVA, MVA, CFROI and CVA value-based financial criteria can be used both by investors and executives in many areas like performance measurement, determination of managers' wages, communication with shareholders and investors, motivation of managers, decision-making for capital budgeting, company valuation and etc. In the literature, the selection of stocks that will take part in portfolio is one of the fields which is commonly discussed and in which many methods are suggested and various studies is carried out about.

The main purpose of this study is the determination of stocks, which will take part in portfolio, by using value-based financial performance criteria. At this point, during research period, by using those criteria some portfolios were created from stocks which have the highest value and their returns were compared from various perspectives. The universe of the study is industrial businesses which are listed in BIST 100 index. The analyses were conducted and commented through annually data of businesses between 2010-2014 years. The findings show that the return on portfolios which composed by using value-based performance criteria are relatively higher than the returns within the scope of index. Moreover, it is seen that the portfolios which is created by EVA values have the highest rate of return among those criteria.