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Optimal Portfolio Selection: A Pedagogical Note

Carl B. McGowan, Jr. (University of Missouri)
Henry W. Collier (Michigan State University)
Colin M. Young (Bentley College)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 February 1992

Abstract

The objective of this paper is to demonstrate how to use the Elton, Gruber, and Padberg [1978] model to construct optimal portfolios and to facilitate the use of this paradigm by providing an example of how the technique is used. The EGP model uses the risk‐adjusted, excess return for an asset to determine the optimal portfolio for a given risk‐free rate of return. This paper shows exactly how to calculate the optimal portfolio and provides a True Basic@ program to do so. The data used are constructed from Capital International Indexes taken from various issues of Barrons from March 1978 to December 1986.

Citation

McGowan, C.B., Collier, H.W. and Young, C.M. (1992), "Optimal Portfolio Selection: A Pedagogical Note", Managerial Finance, Vol. 18 No. 2, pp. 49-62. https://doi.org/10.1108/eb018449

Publisher

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MCB UP Ltd

Copyright © 1992, MCB UP Limited