Portfolio optimization using the generalized reduced gradient nonlinear algorithm

Purpose This study aims to utilize the mean–variance optimization framework of Markowitz (1952) and the generalized reduced gradient (GRG) nonlinear algorithm to find the optimal portfolio that maximizes return while keeping risk at minimum. Design/methodology/approach This study applies the portfol...

Celý popis

Uloženo v:
Podrobná bibliografie
Vydáno v:International journal of Islamic and Middle Eastern finance and management Ročník 9; číslo 4; s. 570 - 582
Hlavní autor: Alrabadi, Dima Waleed Hanna
Médium: Journal Article
Jazyk:angličtina
Vydáno: Bingley Emerald Group Publishing Limited 14.11.2016
Témata:
Academic staff
Algorithms
Capital assets
Economic models
Game theory
Investments
Investors
Kurtosis
Linear programming
Optimization
Portfolio management
Portfolios
Problems
Quadratic programming
Risk management
Securities markets
Skewness
Stock exchanges
Stocks
Studies
Portfolio optimization
Modern portfolio theory
Amman Stock Exchange
Generalized reduced gradient nonlinear algorithm
ISSN:1753-8394, 1753-8408
On-line přístup:Získat plný text
Tagy: Přidat tag
Žádné tagy, Buďte první, kdo vytvoří štítek k tomuto záznamu!
Popis
Shrnutí:Purpose This study aims to utilize the mean–variance optimization framework of Markowitz (1952) and the generalized reduced gradient (GRG) nonlinear algorithm to find the optimal portfolio that maximizes return while keeping risk at minimum. Design/methodology/approach This study applies the portfolio optimization concept of Markowitz (1952) and the GRG nonlinear algorithm to a portfolio consisting of the 30 leading stocks from the three different sectors in Amman Stock Exchange over the period from 2009 to 2013. Findings The selected portfolios achieve a monthly return of 5 per cent whilst keeping risk at minimum. However, if the short-selling constraint is relaxed, the monthly return will be 9 per cent. Moreover, the GRG nonlinear algorithm enables to construct a portfolio with a Sharpe ratio of 7.4. Practical implications The results of this study are vital to both academics and practitioners, specifically the Arab and Jordanian investors. Originality/value To the best of the author’s knowledge, this is the first study in Jordan and in the Arab world that constructs optimum portfolios based on the mean–variance optimization framework of Markowitz (1952) and the GRG nonlinear algorithm.
Bibliografie:ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 14
content type line 23
ISSN:1753-8394
1753-8408
DOI:10.1108/IMEFM-06-2015-0071