engleski

Selection of the Optimal portfolio by Multicriterial Model using Industry and Company Evaluation

This paper presents a Two-step model for selection of the optimal portfolio. In the first step of portfolio optimization we evaluate the industries to which the stocks belong. Evaluation of industries is carried out by a multicriteria model and the obtained result is the share of each industry in the optimal portfolio. Having conducted industry evaluation, in the second step of model optimization we evaluate the stocks within each single industry by multicriteria model and define the share of each company stock in the industry portfolio. Finally, based on the shares of industries in the portfolio calculated in the first step and the shares of company stock in the single industry portfolio calculated in the second step, we determine the share of each company stock in the total portfolio. The contribution of this model is in the possibility to select the criteria characteristic for a particular industry, which are non-existent in other industries and are unavoidable for evaluation of company stocks in that particular industry. Another contribution of this model is in the possibility to evaluate stocks by criteria whose mean values are different in different industries while avoiding mistakes occurring just because of different criteria mean values for a particular industry. The multicriterial method applied in this paper is based on the PROMETHEE approach. The selected model has been applied in Zagreb Stock Exchange (ZSE) as a real case. In 1952 H. M. Markowitz developed the first model for portfolio optimization and with that model he placed foundation of the modern portfolio theory. His model is based upon only two criteria: return and risk. The risk is measured by the variance of returns’ distribution.

optimal portfolio ; multicriterial model ; industry

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