Review of Research on Markowitz Model in Portfolios

DOI

10.2991/aebmr.k.220405.131How to use a DOI?

Keywords

Markowitz Models; Mean-variance Models; Optimal Combinations; Efficient Frontier

Abstract

In modern portfolio theory, the Markowitz model is also known as the mean-variance model, which is the core of modern portfolio theory. The Markowitz model explains well the process of calculating the optimal portfolio solution and its principles. In addition to this, it is clear that the model also describes various situations in a portfolio by constructing the horizontal axis as the variance and the vertical axis as the mean. It is also explained in the Markowitz model that this uses the variance to represent the risk of the portfolio and the mean to represent the expected return of the portfolio. This paper aims to analyze the study of the Markowitz model in the context of investment portfolios. Through analysis, it is found that Markowitz though includes advantages like the ones just mentioned, the model may still have some disadvantages as well as limitations. For example, the model is only valid if the financial markets are strong-form efficient. Further, strong-form efficiency implies that financial markets are free from insider information and irrational investors and investment behavior. Finally, based on this model, the paper will conclude with future perspectives and related recommendations.

Copyright

© 2022 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article distributed under the CC BY-NC 4.0 license.

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TY  - CONF
AU  - Qi Guo
PY  - 2022
DA  - 2022/04/29
TI  - Review of Research on Markowitz Model in Portfolios
BT  - Proceedings of the 2022 7th International Conference on Social Sciences and Economic Development (ICSSED 2022)
PB  - Atlantis Press
SP  - 786
EP  - 790
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.220405.131
DO  - 10.2991/aebmr.k.220405.131
ID  - Guo2022
ER  -