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APPLICATION OF MARKOWITZ MODEL IN ANALYSING RISK AND RETURN A CASE STUDY OF BSE STOCK

Manas Pandey

DOI: 10.22495/rgcv2i1art1

Abstract

In this paper the optimal portfolio formation using real life data subject to two different constraint sets is attempted. It is a theoretical framework for the analysis of risk return choices. Decisions are based on the concept of efficient portfolios. Markowitz portfolio analysis gives as output an efficient frontier on which each portfolio is the highest return earning portfolio for a specified level of risk. The investors can reduce their risks and can maximize their return from the investment, The Markowitz portfolio selections were obtained by solving the portfolio optimization problems to get maximum total returns, constrained by minimum allowable risk level. Investors can get lot of information knowledge about how to invest when to invest and why to invest in the particular portfolio. It basically calculates the standard deviation and returns for each of the feasible portfolios and identifies the efficient frontier, the boundary of the feasible portfolios of increasing returns.

Keywords: Efficient Portfolios, Portfolio Optimization, Efficient Frontier, Variance, Covariance, Risk and Return

How to cite this paper: Pandey, M. (2012). Application of Markowitz model in analysing risk and return a case study of BSE stock. Risk Governance and Control: Financial Markets & Institutions, 2(1), 7-15. http://dx.doi.org/10.22495/rgcv2i1art1

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