Question

Essay Discuss the Selection of Asset Portfolio by Markowitz Model

Essay

Discuss the Selection of Asset Portfolio by Markowitz Model

Homework Answers

Answer #1

Markowitz model is theoretical framework for analysis of risk and return their inter relationships. It is used for measurement of risk & mathematical programming for selection of assets portfolio in an efficient manner. Efficient portfolio is expected to yield the highest return for given level of risk for a given level of return.

Portfolio of assets involves the selection of securities. Each individual investors put his wealth in combination of assets depending on his wealth income & his preferences. The portfolio that selection of assets should be based on lowest risk, as measured by it's standard deviation from the mean of expected returns. Thus, investors chooses assets with lowest variability of returns.

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