A Note on Markowitz Model
12 Pages Posted: 10 Oct 2019 Last revised: 28 Jan 2022
Date Written: September 29, 2021
The Markowitz's model can be very useful in practice. Portfolio managers and private investors can use it easily having the necessary software for its correct application. Using a sample of daily mutual fund returns from the UK market for an interval covering from January 1st, 1990 to December 31, 2020; in our study we show that the Markowitz model is able to provide portfolios that beat reference market portfolios (FTSE 100 and FTSE All-Share Index), obtaining higher returns with a lower risk. Both the FTSE 100 and the FTSE All-Share Index are not efficient portfolios, not reflecting the behaviour of the theoretical market portfolio. Therefore, the Markowitz model, as a tool for investment selection, provides portfolios with better performance than market benchmarks.
Keywords: Mutual Funds; Markowitz Model; Fund Performance; Portfolio Selection
JEL Classification: G11, G12
Suggested Citation: Suggested Citation