Tools and Techniques for Economic Decision Analysis

Širůček, Martin and Křen, Lukáš (2016): Tools and Techniques for Economic Decision Analysis. Published in: Tools and techniques for economic decision analysis , Vol. 1, No. 1 (2016): pp. 25-43.

Abstract

This paper is focused on building investment portfolios by using the Markowitz Portfo-lio Theory (MPT). Derivation based on the Capital Asset Pricing Model (CAPM) is used to calculate the weights of individual securities in portfolios. The calculated portfolios include a portfolio copying the benchmark made using the CAPM model, portfolio with low and high beta coefficients, and a random portfolio. Only stocks were selected for the examined sample from all the asset classes. Stocks in each portfolio are put together according to predefined criteria. All stocks were selected from Dow Jones Industrial Average (DJIA) index which serves as a benchmark, too. Portfolios were compared based on their risk and return profiles. The results of this work will provide general recommendations on the optimal approach to choose securities for an investor's portfolio.

• Item Type: MPRA Paper
• Language: English
• Keywords: Markowitz Portfolio Theory, Modern Portfolio Theory, Capital Asset Pricing Model, CAPM, diversification, stock portfolio
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading

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