An Evaluation of Markowitz’s Portfolio Theory and its Applicability in Nigeria’s Investment Environment:

An Empirical Analysis (2010–2025)

Abstract

This study empirically evaluates the applicability of Harry Markowitz’s Modern Portfolio Theory (MPT) within Nigeria’s investment environment over the period 2010–2025. The study integrates MPT with William Sharpe’s Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT) developed by Stephen Ross. Using secondary time-series data and a portfolio optimization framework, the study employs descriptive statistics, unit root tests, correlation analysis, and multiple regression techniques to examine the relationship between portfolio returns and macroeconomic variables. Findings reveal that while diversification reduces unsystematic risk, macroeconomic instability significantly affects portfolio performance in Nigeria. The results further indicate that multi-factor models outperform traditional MPT assumptions. The study concludes that MPT remains relevant but requires modification to reflect the structural realities of emerging markets.