Portfolio Optimization Based on 10 UK Stocks
DOI:
https://doi.org/10.54691/bcpbm.v30i.2432Keywords:
Portfolio optimization; mean-variance; UK stock market.Abstract
The rose of the interest rate caused turbulence in the UK stock market, raising more attention of investors on portfolio optimization. This study selected 10 UK stocks according to their market capitalization. By using the Monte Carlo simulation, this paper found the efficient frontier and constructed the 1/N, the maximum Sharpe ratio and the minimum volatility portfolio. The result showed that the British American Tobacco possesses the largest proportion of the maximum Sharpe ratio portfolio, and the GSK for the portfolio with the minimum variance. Through comparing the cumulative return of the three portfolios with the FTSE 100 Index, all three portfolios are found to outperform the benchmark index. This result may elucidate the portfolio management for some investors in this especial period.
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