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The Global Minimum Variance Portfolio and Efficient Frontier Approach in Developed and Developing Economies: A Case Study of International Stock Markets

Beltrao Horta, Frederico (2021) The Global Minimum Variance Portfolio and Efficient Frontier Approach in Developed and Developing Economies: A Case Study of International Stock Markets. Masters thesis, Dublin, National College of Ireland.

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Abstract

Global minimum variance portfolio (GMVP) is the portfolio with lowest variance among all other feasible portfolios. In addition, efficient frontier is the combination of all other feasible portfolios which have higher standard deviations and higher expected return. The aim of achieve GMVP and efficient frontier is to enable investors considered risk averse to define the risk they are willing to take according to the expected return. The study had the objective to find the GMVP and the efficient frontier of five developed economies and five developing economies, using five stocks of each country. Furthermore, the study aimed to gather the developed economies in one group, the developing economies in another and finally, created one group of all of them. The research was conducted using the Solver tool, from Excel, and graphs were plotted to illustrate and facilitate the understanding. The time frame used for the study was from 01/01/2010 to 31/12/2020, and the adjusted closing price was collected from Yahoo Finance over the period. From the results it was possible to conclude that diversification of the portfolio brings lowest risk and highest return to the investment. Even though the number of assets included in the study is considerably high if invested by an individual, the distribution of weights over developed and developing economies result in achieve a higher expected return assuming less risk to the portfolio.

Item Type: Thesis (Masters)
Uncontrolled Keywords: Global Minimum Variance Portfolio; Efficient Frontier; Portfolio Diversification; Portfolio Theory
Subjects: H Social Sciences > HG Finance > Investment
H Social Sciences > HG Finance > Investment > Investment Strategy
Divisions: School of Business > Master of Science in Finance
Depositing User: Clara Chan
Date Deposited: 24 Feb 2022 17:22
Last Modified: 24 Feb 2022 17:22
URI: https://norma.ncirl.ie/id/eprint/5485

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