Application of Markowitz Portfolio Theory by Building Optimal Portfolio on the US Stock Market

Martin Sirucek () and Lukáš Křen

MPRA Paper from University Library of Munich, Germany

Abstract: ŠIRŮČEK MARTIN, KŘEN LUKÁŠ. 2015. Application of Markowitz Portfolio Theory by Building Optimal Portfolio on the US Stock Market. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 63(4): 1375–1386. This paper is focused on building investment portfolios by using the Markowitz Portfolio Theory (MPT). Derivation based on the Capital Asset Pricing Model (CAPM) is used to calculate the weights of individual securities in portfolios. The calculated portfolios include a portfolio copying the benchmark made using the CAPM model, portfolio with low and high beta coeffi cients, and a random portfolio. Only stocks were selected for the examined sample from all the asset classes. Stocks in each portfolio are put together according to predefi ned criteria. All stocks were selected from Dow Jones Industrial Average (DJIA) index which serves as a benchmark, too. Portfolios were compared based on their risk and return profi les. The results of this work will provide general recommendations on the optimal approach to choose securities for an investor’s portfolio.

Keywords: Markowitz Portfolio Theory; Modern Portfolio Theory; Capital Asset Pricing Model; CAPM; diversifi cation; stock portfolio (search for similar items in EconPapers)
JEL-codes: G11 G15 (search for similar items in EconPapers)
Date: 2015-09-02
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Published in Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis 4.63(2015): pp. 1375-1386

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Journal Article: Application of Markowitz Portfolio Theory by Building Optimal Portfolio on the US Stock Market (2015)
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