Financial Portfolio Problem
Portfolio Instructions |
The portfolio selection problem helps the investor achieve maximum
return at his chosen level of risks. The more risks he chooses to take
on,the more return he can expect.
The basic idea of the portfolio selection is to have the investor
choose stocks and bonds and a risk level. The portfolio selection
solver will then maximize the returns offsetting those that
decrease in value against those that increase.
A key to maximize returns is to diversify the types of investments. The
investor may want to consider investing in stocks that are from different companies and industry sectors.
One strategy to do it is to select the stocks and funds randomly
(assuming that, without any knowledge of the trends of the stocks,
gains and losses are random). Another way is to use some mathematical techniques
in selecting the optimal portfolio.
In this web-page, we apply some mathematical techniques to find the optimal
The model considered here, based on the portfolio theory developed by
Markowitz (Markowitz, H."Portfolio Selection", Journal of Finance,
march 1952, pp. 77-91), finds the portfolio that maximizes the returns on the stocks chosen by
the investor at his chosen level of risks.
We also present a re-asset allocate model that allows the
investor to modify his current portfolio.
Since this web page is offered for research purposes, only a small subset
of stocks are offered for selection. The data for these stocks have been kept daily for
the last three months.
Last Updated: Sep 23, 1998
© 1997-1998 Professor Dorit S.Hochbaum and Dr Olivier Goldschmidt,
All Rights Reserved Worldwide