# Portfolio Selection Essay

4758 Words Aug 13th, 2012 20 Pages
American Finance Association

Portfolio Selection Author(s): Harry Markowitz Source: The Journal of Finance, Vol. 7, No. 1 (Mar., 1952), pp. 77-91 Published by: Blackwell Publishing for the American Finance Association Stable URL: http://www.jstor.org/stable/2975974 . Accessed: 23/06/2011 20:52
Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please
If two or more securitieshave,the same value, then any of these or any combination of these is as good as any other. We can see this analytically:suppose there are N securities;let rBbe the anticipated return (howeverdecided upon) at time t per dollar invested in security i; let d be the rate at which the return on the Oh security at time t is discounted back to the present; let Xi be the rela0 O tive amount invested in security i. We exdude short sales, thus Xi for all i. Then the discounted anticipated return of the portfolio is oo N

R=3

E

di,t itX i=1 t=1

=

i=l

XiEdit

t=l

rit)

= returnof the ith security,therefore RX E di rit is the discounted t=1 R = YXiRi where Ri is independent of Xi. Since Xi 3 0 for all i and 2Xi = 1, R is a weighted average of RXwith the Xi as non-negative weights. To maximize R, we let Xi = 1 for i with maximum Ri. If several Raa, a = 1, ..., K are maximum then any allocation with
K

= E Xaa 1 a=1 maximizes R. In no case is a diversifiedportfolio preferredto all nondiversifiedportfolios. It will be convenient at this point to consider a static model. Instead of

## Related Documents

• ###### Essay The Selection Of A Selection

objective to having a selection. Yes, she feels she is capable of ruling and running her country on her own but what about the long term effects of it? She is bound to produce heirs of her own but how is that supposed to be possible if she has no one by her side to help along the way? The selection is not only supposed to be a good change for her country that she claims she cares most for, but also Edlyn herself. When reading this book I was reminded of her mother 's selection process, “The One”,…

Words: 1610 - Pages: 7
• ###### Essay Portfolio Strategy Assignment

This paper presents a revised portfolio strategy for Delta Airlines, Inc. as result of a large cash infusion it recently has received in the amount of \$700 million. Delta Airlines, Inc. provides schedule air transportation for passengers and cargo throughout the United States and around the world. Delta Airlines has a global route network giving is a presence in every major domestic and international market including airports in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis…

Words: 1765 - Pages: 8
• ###### Job Portfolio Essay

Signature Assignment Job Portfolio for food server position at Best Western Hotel by Ina D. HRM Abstract The presented job portfolio is for a food server position at the restaurant of Best Western San Diego. The portfolio present the staffing planning involved for the food server…

Words: 2227 - Pages: 9
• ###### Essay Project Portfolio Management

Project Portfolio Management Project Portfolio Management is a methodology to manage a company’s projects in a similar way that financial manager manages the company’s cash flow and related finances. According to Rouse (2013), “PPM (project and portfolio management) is a strategic prioritization methodology employed to analyze and manage current or proposed projects within an organization”. The purpose is to determine the best available sequence and group of projects to achieve organizational…

Words: 2599 - Pages: 11
• ###### Essay on Portfolio Composition

Portfolio Composition Portfolio Composition These days there are all kinds of investments. There are equities, options, bonds, and many others that can go into a selection for any kind of investment vehicle be it an index like the Dow 30, or a mutual fund like MYHAX from Mainstay. What makes things more complicated is when people need to contend with not only the selection process, but also issues with regulation and what the parent company would like to see. Classifications coupled with the…

Words: 1033 - Pages: 5
• ###### Essay Globalized Portfolio Risks Of Globalized Portfolios

Globalized Portfolio Risks Globalized portfolios have been a way in which new growth opportunities can occur for investors. Globalized portfolio investing is a type of investment that is typically easily traded, can be less permanent, and often times does not represent a controlling stake in an enterprise (Levin Institute, 2012). Investments can be represented in stocks or bonds and typically take form in a type of interest payment or non-voting dividends. For a country that is on an uphill trend…

Words: 949 - Pages: 4
• ###### Case Study : John & Marsha on Portfolio Selection Essay

ซึ่งถือได้ว่าเป็นการกระจายการลงทุนที่ทำให้ความเสี่ยงลดลง ซึ่งสอดคล้องกับทฤษฎี Modern Portfolio Theory ของ Harry M. Markowitz (1952) ที่กล่าวไว้ว่า “Don’t put all your eggs in one basket” สรุปรายละเอียดของ Mini-Case : John & Marsha on Portfolio Selection John ทำหน้าที่บริหาร Portfolio ซึ่งมีมูลค่า 125 ล้านดอลลาร์ของนักลงทุนอยู่ เขาปรึกษากับ Marsha เกี่ยวกับปัญหาของการบริหารจัดการหุ้นใน Portfolio ของเขา โดย John คิดว่าที่ผ่านมาผลตอบแทนจาก portfolio ที่เขาดูแลอยู่นั้นมักจะใกล้เคียงกับอัตราผลตอบแทนของตลาดและอิงจากกราฟ…

Words: 771 - Pages: 4
• ###### Essay Modern Portfolio Theory

foundations were laid bare. Even the core of investing theories related to portfolios has come under pressure. Yet the belief in Modern Portfolio Theory has remained strong amongst the investors. Modern Portfolio Theory (MPT) is a theory that tells investors how to minimise risks associated with investment and at the same time, maximise return on the investments by proper resource allocation and diversifying their portfolios – it is based on the theory that risk can be lessened by diversifying into…

Words: 1079 - Pages: 5
• ###### Project Portfolio Selection - Case Study Essay

delays affect the timeline of a project and negatively affect the cost of labor and materials at a time of even moderate inflation. Any of these factors could invalidate the rankings shown above. Using NPV as the sole decision factor for project selection has limitations. To help level the field and compensate for each project’s time value of money, unequal lifetimes, riskiness, and size, a weighted scoring method could be used that gives appropriate consideration to these variables. Reconsider…

Words: 1811 - Pages: 8
• ###### Essay on Portfolio

W14232 INVESTMENTS: DELINEATING AN EFFICIENT PORTFOLIO Upasana Mitra and M. Kannadhasan wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the…

Words: 2999 - Pages: 12