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2010•RePEc: Research Papers in EconomicsRequires access

A MODEL OF CONSTRUCTION OF A MINIMUM RISK PORTFOLIO BASED ON MARKOWITZ PORTFOLIO THEORY. APPLICATION ON BUCHAREST STOCK EXCHANGE

Carmen Corduneanu, Assist. Laura Raisa Miloș

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Abstract

In this paper, the authors test a model of an efficient portfolio with minimum risk, starting from the analysis of one year portfolio payoff and risk of ten securities from Bucharest Stock Exchange. In accordance with the modern portfolio theory, maximization of returns at minimal risk should be the main objective of every investor. We show, using a mathematical methodology based on Markowitz portfolio theory and on Lagrange function, which is the exact amount of stocks to be purchased from a Bucharest Stock Exchange sample of securities in order to have an efficient portfolio with minimum risk at a given return.

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In this paper, the authors test a model of an efficient portfolio with minimum risk, starting from the analysis of one year portfolio payoff and risk of ten securities from Bucharest Stock Exchange. In accordance with the modern portfolio theory, maximization of returns at minimal risk should be the main objective of every investor. We show, using a mathematical methodology based on Markowitz portfolio theory and on Lagrange function, which is the exact amount of stocks to be purchased from a Bucharest Stock Exchange sample of securities in order to have an efficient portfolio with minimum risk at a given return.

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Available abstract

In this paper, the authors test a model of an efficient portfolio with minimum risk, starting from the analysis of one year portfolio payoff and risk of ten securities from Bucharest Stock Exchange. In accordance with the modern portfolio theory, maximization of returns at minimal risk should be the main objective of every investor. We show, using a mathematical methodology based on Markowitz portfolio theory and on Lagrange function, which is the exact amount of stocks to be purchased from a Bucharest Stock Exchange sample of securities in order to have an efficient portfolio with minimum risk at a given return.

Key concepts: Portfolio optimization, Post-modern portfolio theory, Portfolio, Stock exchange, Modern portfolio theory, Portfolio insurance, Efficient frontier, Financial economics

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A MODEL OF CONSTRUCTION OF A MINIMUM RISK PORTFOLIO BASED ON MARKOWITZ PORTFOLIO THEORY. APPLICATION ON BUCHAREST STOCK EXCHANGE — Research Paper | ScholarLens