Construction of Efficient Portfolio & Efficient Frontier
Autor: peter • February 6, 2014 • Research Paper • 3,521 Words (15 Pages) • 1,839 Views
Construction of Efficient Portfolio & Efficient Frontier
"Understanding the need & optimizing the return"
Summary
In today's financial marketplace, a well-maintained portfolio is vital to any investor's success. As an individual investor, one need to know how to determine an asset allocation that best conforms to the personal investment goals and strategies. In other words, portfolio should meet future needs for capital and give peace of mind. Investors can construct portfolios aligned to their goals and investment strategies by following a systematic approach. Here we go over some essential steps for taking such an approach.
Efficient Portfolio is a portfolio offering higher return in a given risk level or lower risk at a given Return level. The point Minimum Variance Portfolio is a portfolio with lowest risk at the curve. Above part of Minimum Variance Portfolio is Called Efficient Frontier. Our main objective in this report is to find the efficient portfolio with a portfolio of 10 securities which are listed in DSE. The volatility of portfolio can be limited by spreading out risk among different types of investments. The "right" kind of diversification requires that we own securities that do not behave alike. So in this report I have tried to construct efficient portfolios on the basis of different risk/return requirement. I have chosen the companies subjectively. I have analyzed eight conditions to construct efficient portfolio which are Maximizing Theta allowing short sell, Maximizing Theta by not allowing short sell, Minimizing Risk (Standard Deviation) by allowing short sell, Minimizing Risk (Standard Deviation) by not allowing short sell, Maximizing Theta for a given return by not allowing short sell, Maximizing Theta for given return by allowing short sell, Minimizing Risk (Standard Deviation) by allowing short sell for a given return, Minimizing Risk (Standard Deviation) by not allowing short sell for a given return.
Table of Contents
No. Topic Page No.
1. Introduction
01
2. What is Optimum or Efficient Portfolio 03
3. Construction of Efficient Portfolio
04
4. Economy Analysis
05
5. Industry Analysis
06
6. Company Analysis & selection 10
7. Analysis & Interpretation
...