Hrvatsko društvo ekonomista

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October 2011. ::: Vol.62 No.09-10

Marko Jerončić
Zdravka Aljinović

FORMING THE OPTIMAL PORTFOLIO BASED ON THE MARKOWITZ MODEL WITH DIVERSIFICATION OF COMPANIES BY SECTORS Stručni rad The Markowitz’ (mean-variance, MV) model is applied in forming the optimal portfolio based on a sample of stocks quoted on The Zagreb Stock Exchange, considering defined and adjusted constraints, where special attention is given to the portfolio diversification not only by stock, but also by sector. Also, very important aspect is the analysis of financial indicators which shows that some stocks, although with positive expected return, have very bad financial results and consequently they are not advisable in portfolios of risk and speculation averse investors. All calculations are presented and carried out by table calculator Excel where Solver is used for solving mathematical programming i.e. optimization problem. The result of such comprehensive analysis and optimization process is a portfolio in the group of conservative and stable portfolios, with very solid annual return of 12% and relatively low risk. It consists of stocks considered as blue chip stocks on the Croatian stock market and has very good sector and stock diversifi cation. It is suitable for investors who are risk averse, but also want to reach solid annual returns. Markowitz’ portfolio optimization model; The Zagreb Stock Exchange; allocation by sector; the analysis of financial reports; Excel Puni tekst (Hrvatski) Str. 583 - 606 (pdf, 377.96 KB)

FORMING THE OPTIMAL PORTFOLIO BASED ON THE MARKOWITZ MODEL WITH DIVERSIFICATION OF COMPANIES BY SECTORS

Stručni rad

The Markowitz’ (mean-variance, MV) model is applied in forming the optimal portfolio based on a sample of stocks quoted on The Zagreb Stock Exchange, considering defined and adjusted constraints, where special attention is given to the portfolio diversification not only by stock, but also by sector. Also, very important aspect is the analysis of financial indicators which shows that some stocks, although with positive expected return, have very bad financial results and consequently they are not advisable in portfolios of risk and speculation averse investors. All calculations are presented and carried out by table calculator Excel where Solver is used for solving mathematical programming i.e. optimization problem. The result of such comprehensive analysis and optimization process is a portfolio in the group of conservative and stable portfolios, with very solid annual return of 12% and relatively low risk. It consists of stocks considered as blue chip stocks on the Croatian stock market and has very good sector and stock diversifi cation. It is suitable for investors who are risk averse, but also want to reach solid annual returns.

Markowitz’ portfolio optimization model; The Zagreb Stock Exchange; allocation by sector; the analysis of financial reports; Excel

Puni tekst (Hrvatski) Str. 583 - 606 (pdf, 377.96 KB)