An optimal portfolio mix for stable and turbulent times: A study on selected Philippine asset classes using a modified Markowitz mean-variance model for the years 2006-2015

• Main Authors: Fernandez, Janice, Ignacio, Nicole, Ng, Patricia Samantha, Serrano, Jose Reginaldo
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Portfolio management > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/9689
• Institution: De La Salle University

The varying risk and returns of investments shows that techniques are needed to aid investors in the allocation of their investments. This paper analyzes the effectivity of a modified Markowitz mean-variance model in determining an optimal portfolio mix in both stable and turbulent times of selected Philippine securities. In this study, the modified mean-variance model introduced by Chow, Jacquier, Kritzman, and Lowry (1999) was utilized because it addresses the criticisms on the original Markowitz model. It also offers a process for dividing data into different risk regimes in order to make optimal blended portfolios that better suit the current environment, whether it is normal, stressful, or quiet. The researchers were able to identify twenty (20) outliers out of the one hundred twenty (120) months covered in the study. Through this, a new covariance matrix was constructed and this generated blended portfolios (Portfolio B, C, and D) that produced a higher profit (return) with lower risk (standard deviation) as compared to the full sample portfolio mix.