GENERALIZING OF MARKOWITZ’S THEORY IN OPTIMIZING THE PORTFOLIO OF STOCKS

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SHAHRESTANI HAMID; SAVABI ASL FARHAD; BIDABAD BIJAN

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Journal: ECONOMIC RESEARCH REVIEW Year:2011 | Volume:10 | Issue:4 (39) Page(s): 207-229

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Title

GENERALIZING OF MARKOWITZ’S THEORY IN OPTIMIZING THE PORTFOLIO OF STOCKS

Author(s)

SHAHRESTANI HAMID | SAVABI ASL FARHAD | BIDABAD BIJAN | Issue Writer Certificate

Keywords

TEHRAN STOCK EXCHANGEQ3

MEAN- VARIANCE EFFICIENT FRONTIERQ3

CAPITAL MARKET LINEQ3

SYSTEMATIC RISKQ3

UNSYSTEMATIC RISK& CAPMQ3

Abstract

Markowitz model to determine the weight of each stock in the portfolio is based on the optimal choice of stocks, in order to maximize the expected return.On the other hand, the expected value of each stock is placed in the model. The covariance of variations of the stock values is assumed fixed (exogenous) in the model.In this article by combining Markowitz and Sharpe theories a new model is introduced, which is more efficient compared with Markowitz’s efficient frontier.In other word, by endogenizing the covariances of the rate of return of related stocks in the selected portfolio, the expected return of the propsed model is always larger or equal to expanded model compared with markowitz traditional model.In the suggested model, at any given level of portfolio risk, the proportion of unsystematic risk, according to the sharpe theory, which market doesn’t reward, stands on the lowest possible level.The advantage of proposed model, both theorically and practically is proved through finding the optimal portfolio of stocks for large cement factories in TEHRAN STOCK EXCHANGE market compared with Markowitz model.

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APA: Copy

SHAHRESTANI, HAMID, SAVABI ASL, FARHAD, & BIDABAD, BIJAN. (2011). GENERALIZING OF MARKOWITZ’S THEORY IN OPTIMIZING THE PORTFOLIO OF STOCKS. ECONOMIC RESEARCH REVIEW, 10(4 (39)), 207-229. SID. https://sid.ir/paper/67188/en

Vancouver: Copy

SHAHRESTANI HAMID, SAVABI ASL FARHAD, BIDABAD BIJAN. GENERALIZING OF MARKOWITZ’S THEORY IN OPTIMIZING THE PORTFOLIO OF STOCKS. ECONOMIC RESEARCH REVIEW[Internet]. 2011;10(4 (39)):207-229. Available from: https://sid.ir/paper/67188/en

IEEE: Copy

HAMID SHAHRESTANI, FARHAD SAVABI ASL, and BIJAN BIDABAD, “GENERALIZING OF MARKOWITZ’S THEORY IN OPTIMIZING THE PORTFOLIO OF STOCKS,” ECONOMIC RESEARCH REVIEW, vol. 10, no. 4 (39), pp. 207–229, 2011, [Online]. Available: https://sid.ir/paper/67188/en

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