The Problem of Portfolio Choice Using Additional Information from Financial Statements

The classical models for the construction of an investment portfolio can be criticized for several reasons. First, it takes into account only information that is revealed in the market prices of stocks. Second, variance can be a poor risk measure if the distribution of returns differs much from the normal distribution.In the paper, we consider some extensions of the classical portfolio theory and try to evaluate them in the situation of a crisis. We consider some additional criteria for portfolio selection, based on the market multiples, which represents an overall situation of companies. Additionally, we consider semi-variance as an alternative measure of risk. We construct a range of portfolios of companies from the German stock market which were built using different criteria for risk and fundamental values. Then we compare their returns during the crisis after the outbreak of the Covid-19 pandemic