<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The problem of selecting an optimal set of investment stocks is of a huge interest for both individual and institutional investors. This paper compares the hybrid multiple criteria decision making (MCDM) approach to selecting the best stock to invest in, with the stock selection using modern portfolio theory (MPT). When selecting stocks, it is very important to thoroughly analyse stocks, according to multiple criteria, including their equity market indicators, as well as financial indicators. The objective of the research is to compare the stock selection using a hybrid MCDM approach and MPT, which includes only the equity market indicators. The analysed sample includes 18 stocks, which are CROBEX components on the Croatian capital market from January 2017 to January 2019. The rankings of stocks were calculated using five MCDM methods. These were then used to obtain the final hybrid stock ranking, which was compared to the MPT stock selection. The results show that there is a significant difference in the stock rankings. However, the stocks which have not entered any portfolio in MPT selection were ranked as lowest according to the hybrid MCDM approach, which confirms that those stocks are the worst to invest in. The research can serve as a guidance for investors to use all available stock information in their decision making process of investment.</p>
</abstract>

The problem of selecting an optimal set of investment stocks is of a huge interest for both individual and institutional investors. This paper compares the hybrid multiple criteria decision making (MCDM) approach to selecting the best stock to invest in, with the stock selection using modern portfolio theory (MPT). When selecting stocks, it is very important to thoroughly analyse stocks, according to multiple criteria, including their equity market indicators, as well as financial indicators. The objective of the research is to compare the stock selection using a hybrid MCDM approach and MPT, which includes only the equity market indicators. The analysed sample includes 18 stocks, which are CROBEX components on the Croatian capital market from January 2017 to January 2019. The rankings of stocks were calculated using five MCDM methods. These were then used to obtain the final hybrid stock ranking, which was compared to the MPT stock selection. The results show that there is a significant difference in the stock rankings. However, the stocks which have not entered any portfolio in MPT selection were ranked as lowest according to the hybrid MCDM approach, which confirms that those stocks are the worst to invest in. The research can serve as a guidance for investors to use all available stock information in their decision making process of investment.

Comparative analysis of stock selection using a hybrid MCDM approach and modern portfolio theory

Faculty of Economics, Business and Tourism

Croatian Review of Economic, Business and Social Statistics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The problem of selecting an optimal set of investment stocks is of a huge interest for both individual and institutional investors. This paper compares the...

Comparative analysis of stock selection using a hybrid MCDM approach and modern portfolio theory

Published Online: Jan 05, 2021

Page range: 58 - 68

Received: Oct 15, 2020

Accepted: Dec 02, 2020

DOI: https://doi.org/10.2478/crebss-2020-0011

Keywords
MCDM approach, modern portfolio theory, stock selection

© 2020 Marija Vuković et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Comparative analysis of stock selection using a hybrid MCDM approach and modern portfolio theory

Published Online: Jan 05, 2021

Page range: 58 - 68

Received: Oct 15, 2020

Accepted: Dec 02, 2020

DOI: https://doi.org/10.2478/crebss-2020-0011

KeywordsMCDM approach, modern portfolio theory, stock selection

© 2020 Marija Vuković et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
MCDM approach, modern portfolio theory, stock selection