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A Model Of Construction Of A Minimum Risk Portfolio Based On Markowitz Portfolio Theory. Application On Bucharest Stock Exchange

Author

Listed:
  • Prof. Carmen Corduneanu Ph. D

    (West University of Timisoara Faculty of Economics and Business Administration Timisoara, Romania)

  • Assist. Laura Raisa Miloș Ph. D

    (“Eftimie Murgu” University Reșița Faculty of Economic and Administrative Sciences Reșița, Romania)

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.

Suggested Citation

  • Prof. Carmen Corduneanu Ph. D & Assist. Laura Raisa Miloș Ph. D, 2010. "A Model Of Construction Of A Minimum Risk Portfolio Based On Markowitz Portfolio Theory. Application On Bucharest Stock Exchange," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 2(38), pages 1-8, May.
    • Handle: RePEc:aio:aucsse:v:2:y:2010:i:8:p:204-211
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    References listed on IDEAS

    as
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    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    More about this item

    Keywords

    efficient portfolio; risk; return; Markowitz portfolio theory; Bucharest Stock Exchange;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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