Use of the Markowitz model in selecting efficient stock portfolios in Croatia and selected European countries

Markowitzeva moderna teorija portfelja je baza koju investitori često koriste prilikom donošenja odluke o investiranju. Oslanjajući se na aritmetičku sredinu i varijancu pojedinačnih dionica, uvodi očekivani povrat i rizik u opisivanje portfelja. Model se zasniva na maksimiziranju očekivanog prinosa uz određenu razinu rizika, pritom zanemarujući izazove s kojima se investitori mogu sresti ulažući konkretno u Hrvatsku i slična tržišta. Hrvatsko tržište kapitala, kao i većinu onih u susjednim zemljama, karakterizira niska likvidnost i ograničen broj uvrštenih dionica. Takva situacija predstavlja izazov prilikom izbora investicija i sastavljanja portfelja. Ovaj rad iznosi analizu odabranih europskih tržišta s naglaskom na načine filtriranja dionica koji dopuštaju da primjena Markowitzevog modela rezultira ne samo teorijski optimalnim portfeljima, već i onima u koje se u praksi može investirati.Markowitz's Modern Portfolio Theory is a basis often used by investors while making investment decisions. Relying on the arithmetic mean and variance of individual stocks, it introduces expected return and risk in describing portfolios. The model is based on maximising the expected return with a given level of risk, neglecting the challenges investors would need to cope with while investing in Croatian and similar markets. The Croatian equity market, like most other neighbouring countries, is characterized by low liquidity and a limited number of listed stocks. The situation poses a challenge while picking investments and creating portfolios. This paper provides an analysis of selected European markets, highlighting the ways of filtering stocks in a way which lets the use of Markowitz’s model result in not only theoretically optimal, but also investable portfolios