PyCPTAM: Python Module for Constructing Portfolios via Two Alternative Methods

Alan Mustafa and Abdulnasser Hatemi-J

Statistical Software Components from Boston College Department of Economics

Abstract: The possible gains of portfolio diversification have been known to investors for a long period of time. Markowitz (1952) created the original method of optimizing the portfolio problem via the budget shares (i.e., the weights) that result in minimizing the variance of a given portfolio. Hatemi-J and El-Khatib (2015) proposed a different method for obtaining the optimal budget shares that leads to the maximization the risk-adjusted return of the underlying portfolio. This method might be preferred by any rational investor since it joins directly risk and return in the optimization problem. Hatemi-J, Hajji and El-Khatib (2022) deliver a general solution for this optimization problem, which can be used for any number of assets in the portfolio. This Python module creates portfolios via these two different methods. The module is very easy to apply through a GUI (Graphical User Interface) via the Spyder platform. For technical details about the methods see (1) Markowitz H. (1952) Portfolio Selection, Journal of Finance, 7(1), 77-91. (2). Hatemi-J A. and El-Khatib Y. (2015) Portfolio Selection: An Alternative Approach, Economics Letters, 135, 141-143. And (3). Hatemi-J A., Hajji, M.A. and El-Khatib Y. (2022) Exact Solution for the Portfolio Diversification Problem based on Maximizing the Risk Adjusted Return. Research in International Business and Finance, 59, 101548.

Language: Python
Requires: Python
Keywords: portfolio analysis; diversification; optimization (search for similar items in EconPapers)
Date: 2023-02-01
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