Optimal Portfolio - Markowitz Efficient Frontier (With Short Selling Option) Excel Model
Originally published: 19/04/2020 08:25
Last version published: 21/04/2020 13:41
Publication number: ELQ-80541-3
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Optimal Portfolio - Markowitz Efficient Frontier (With Short Selling Option) Excel Model

Use this tool uses Efficient Market Hypothesis to determine the optimized portfolio allocation.

This tool uses up to 10 securities of your choice to build the most optimal portfolio as determined by the Efficient Market Hypothesis, given your tolerance for risk. Features include:

- A dynamic model of the Markowitz Efficient Frontier
- Calculates the Global Minimum Variance Portfolio and Tangent Portfolio
- Both short selling and non-short selling restrictions available
- Covariance and correlation matrix among risky asset classes
- Determine the risk adjusted return for both an equally-weighted and price-weighted portfolio

The Markowitz Efficient Frontier is a grounded in the assumption of efficient market hypothesis. This tool provides a list of portfolio allocations that are structurally optimized given your appetite for risk. Optimal portfolios that lie on the efficient frontier tend to have a greater degree of diversification, which is aims to reduce overall portfolio risk. This tool can be used to compare your current asset allocation with the optimal asset allocation as assumed by the Efficient Market Hypothesis.

It is important to note the assumptions of the Markowitz Efficient Frontier: The risk-return relationships assumes normal distribution, and investors are naturally risk-averse/rational. This model is not to be construed as financial advice.

Feel free to PM me for any details. Thank you!

This Best Practice includes
2 Excel Documents: A blank copy and a filled out version

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Further information

To gain a proper understanding of Efficient Market Hypothesis, and how it can be compared with your current asset allocation.

Need to download macros, and the excel solver (steps to download included)

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