Portfolio Optimization Using Minimum Variance Line Approach: A Case Study of the Social Security and National Insurance Trust
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Date
2017-12
Journal Title
Journal ISSN
Volume Title
Publisher
Ghana Social Science Journal
Abstract
The main motive of investors around the globe is to invest in assets with
the idea of maximizing the return with a minimum risk of investment.
The management of investment portfolio requires carefully selecting
various assets to invest in, as well as managing the proportions of funds
to be channeled into a particular investment. The data used in this study
was obtained from Social Security and National Investment Trust
(SSNIT) covering a five-year period spanning from 2010 to 2014. The
data comprised of the prices of Investment Properties (IVP), Investment
to Maturity (IVM) and Loans Receivable (LR), out of which the
expected return of each asset, the standard deviation (SD) of each asset,
the correlation between assets and the covariance between assets are
computed. The methodology used here was the minimum variance line
approach proposed by Harry Markowitz. The model allowed us to assign
weights to various investment classes by transposing the expected
returns and risk associated with them. The result showed that, as the
expected return of the portfolio increases the various percentage weight
to be invested in IVP and LR increase whilst that of IVM decreases. The portfolio standard deviation or risk on the other hand also increases with
increasing portfolio expected returns
Description
Ghana Social Science Journal, 14(2), 144-166
Keywords
Portfolio Optimization, Minimum Variance, Investment, Properties, Investment to Maturity