The Effectiveness of Simple Diversification in Comparison to Markowitz Portfolio Theory

• Authors: Markowski Lesław , Rutkowska-Ziarko Anna
• Languages of publication: EN

Abstracts

EN

Analysis of capital investments at Warsaw Stock Exchange during the period of from 2004 through 2009 was the main goal of the study. The analysis was conducted on the base of the classic Markowitz portfolio theory and construction of multi-component balanced portfolios. The studies conducted indicate significant advantage of portfolio investments over the investments in individual securities. The largest risk decrease was recorded in case of the portfolios consisting of up to 5 securities. Markowitz optimization applied in the studies allowed finding the portfolios much more secure, at the assumed rate of return, than the multi-component balanced portfolios. The results indicate significant importance of optimization models in the design of the portfolios of securities.

Keywords

EN

simple diversification; portfolio effectiveness; systematic risk; specific risk.

• Publisher: Uniwersytet Warmińsko-Mazurski w Olsztynie
• Journal: Olsztyn Economic Journal
• Year: 2011
• Volume: 6
• Issue: 1
• Pages: 143-154

Dates

published

2011-06-30

Contributors

author

Markowski Lesław

• Chair of Quantitative Methods, University of Warmia and Mazury in Olsztyn

author

Rutkowska-Ziarko Anna

• Chair of Quantitative Methods, University of Warmia and Mazury in Olsztyn

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