Modern Portfolio Theory as effective way of building investment portfolio

Abstract

The paper compares investment portfolios created according to different indicators in order to build the most effective one for various investor profiles by comparing portfolios aiming to maxize profit, minimize risk and portfolio based on Markowitz assumptions. The research focused on 25 companies during two time periods — a bull market which lasted from October 2016 to July 2017, and a bear market lasting from January to October of 2018. Indicators such as the rate of return, standard deviation, and overall score of the portfolio were analyzed. The Modern Portfolio Theory does not prove to be the most effective way of building an investment portfolio. The results should be analyzed individually by investors and may constitute an alternative to a typical approach to stock investing. Results may be useful to investors with exposure to higher than average risk and ones that believe higher standard deviation corresponds to higher rate of return.