OPTIMUM PORTFOLIO SELECTION
PORTFOLIO SELECTION The objective of every investor is to maximize his returns and minimize his risk. Diversification is the method adopted to reduce the risk. It essentially results in the construction of portfolios. The proper goal of construction of portfolios would be to generate a portfolio that provides the highest return and lowest risk. Such a portfolio would be an optimal portfolio. The process of finding the optimal portfolio is described as portfolio selection. The conceptual framework and analytical tools for determining the optimal portfolio in disciplined and objective manner have been provided by Harry Markowitz in his pioneering work on portfolio analysis described in his 1952 “JOURNAL OF FINANCE” article and subsequent book in 1959. His method of portfolio selection is come to be known as Markowitz model. In fact, Markowitz ...