Construct an Empirical Study on the Concept, Modern Portfolio Theory Using Markowitz Model

Abstract

In 1952, Harry Markowitz outlined a concept to aid financiers. By examining different combinations of the provided securities, the model aids in the selection of the optimal portfolio. He proposed an assumption of Modern Portfolio Theory, which aids in the creation of an optimal portfolio via the analysis of several portfolios. The Markowitz model is a theoretical framework for investigating the connections between different types of investment risk and return. The Modern Portfolio Theory (MPT) may help risk-averse investors create diversified portfolios that maximize returns without taking on undue risk. A forecasted return on each asset is required for current portfolio theory to be applied. There is no assurance that future results can be predicted based on past performance. Several market and investor presuppositions form the basis of MPT. We will first describe our finding on the "Markowitz optimization riddle" and the "Markowitz mean-variance portfolio theory," and then provide the theoretical proofs of our findings. Returns on investments are treated as random variables in the Markowitz mean-variance portfolio theory. So, picking the right portfolio weighting components is essential.