Advanced portfolio management using markowitz portfolio theory

Abstract

A portfolio is a collection of stocks made from different companies, the number of stocks can range from 10 to 30 depending on expected return by the investors. Portfolio management is finding the right group of stocks to invest in with detailed risk and return assessment. Finding the right combination is easier said than done, we opted to work with S&P 500 data set. We filter the data set picking the top 10 stocks from each sector based on different criteria, using Markowitz portfolio theory, we generate random portfolios and compare between them on the basis of Voaltility and Sharpe ratio, a ratio generated from return and risk. When plotting all the portfolios a curve is generated called the efficient frontier from which we can select an optimum portfolio based on volatility and return. We then compare our generated portfolio which is dynamic based on the requirements by looking at the most recent stock market data and determine the accuracy for future prediction.