A Note on Markowitz Model

12 Pages Posted: 10 Oct 2019 Last revised: 28 Jan 2022

See all articles by Javier Vidal-García

Javier Vidal-García

Complutense University of Madrid; Harvard University

Marta Vidal

Universidad Europea de Madrid; Universidad Complutense de Madrid (UCM)

Date Written: September 29, 2021

Abstract

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

Vidal-García, Javier and Vidal-García, Javier and Vidal, Marta, A Note on Markowitz Model (September 29, 2021). Available at SSRN: https://ssrn.com/abstract=3461392 or http://dx.doi.org/10.2139/ssrn.3461392

Javier Vidal-García (Contact Author)

Complutense University of Madrid ( email )

School of Business Administration
Somosaguas Campus
Madrid, Madrid 28223
Spain

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Marta Vidal

Universidad Europea de Madrid ( email )

Villaviciosa de Odón
Madrid, 28670
Spain

Universidad Complutense de Madrid (UCM) ( email )

Somosaguas Campus
Madrid, 28223
Spain

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