The Minimum Variance Portfolio, the Tangency Portfolio, and the Associated Matrix Algebra

32 Pages Posted: 16 Jun 2020

See all articles by Tom Arnold

Tom Arnold

University of Richmond - E. Claiborne Robins School of Business

Terry Nixon

Miami University

Date Written: May 21, 2020

Abstract

The matrix algebra associated with finding minimum variance portfolio weights and tangency portfolio weights is greatly simplified by using an Excel presentation. A further simplification of the tangency portfolio weights process is also presented using excess returns for the risky securities. The lesson drawn from this presentation is readily performed online by sharing or recording an Excel screen with students.

Keywords: Minimum variance portfolio, Tangency portfolio, Matrix algebra

JEL Classification: G00, G11

Suggested Citation

Arnold, Thomas M. and Nixon, Terry David, The Minimum Variance Portfolio, the Tangency Portfolio, and the Associated Matrix Algebra (May 21, 2020). Available at SSRN: https://ssrn.com/abstract=3607332 or http://dx.doi.org/10.2139/ssrn.3607332

Thomas M. Arnold (Contact Author)

University of Richmond - E. Claiborne Robins School of Business ( email )

102 UR Drive
University of Richmond, VA 23173
United States
804-287-6399 (Phone)
804-289-8878 (Fax)

Terry David Nixon

Miami University ( email )

Oxford, OH 45056
United States

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