Creating Optimal Portfolio and the Efficient Frontier Using Microsoft Excel®: Teaching Module
Journal Title: Journal of Quantitative Methods (JQM) - Year 2018, Vol 2, Issue 2
Abstract
Portfolio managers and investors strive to achieve the best possible trade-off between risk and return, and one of the tools they use is constructing mean-variance efficient portfolios. Finance students learn about optimal portfolios and efficient frontiers, though it is difficult to replicate them unless they have access to sophisticated software. This paper develops a teaching module that uses Microsoft Excel® to create mean-variance portfolios and traces out the efficient frontier using real-world data. In the process, the students learn to determine optimal investment allocations in a portfolio, select the optimum investment portfolio given investor’s objectives and preferences and learn about factors that influence different asset allocations. For multiple assets (N>3), the paper uses Matrix algebra in Excel®. The paper enables students and investors to learn how to construct real-world mean-variance efficient portfolios using Excel®.
Authors and Affiliations
Saurav Roychoudhury
Keywords
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- EP ID EP546466
- DOI 10.29145/2018/jqm/020207
- Views 262
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