Optimal Portfolio Distribution Utilizing Markowitz'S Model: An Investigation of 30 Stocks In the Sensex Index

Abstract

Constructing an optimal portfolio proves to be a formidable task for both individual and institutional investors. This study employs Markowitz's model to determine optimal portfolio allocation, focusing on 11 stocks within the Sensex index. Interestingly, the calculated optimal portfolio allocation selects only five out of the available 11 stocks. While various methods exist for computing optimal portfolios, each potentially yielding distinct weighted portfolios with different stock compositions, Markowitz's Model stands out as a straightforward approach to determining optimal portfolio weights. Despite the complexity of the portfolio construction process, Markowitz's model provides a simple and effective means to arrive at the most advantageous allocation, streamlining decision-making for investors navigating the intricacies of portfolio optimization. The utilization of this model in the study offers insights into the composition of an optimal portfolio within the context of the Sensex, shedding light on the stocks deemed most favorable for inclusion based on the model's calculations. © 2024 IEEE.