A Note on Markowitz Model

Abstract

Markowitz's model can be very useful in practice. Portfolio managers and private investors can use it easily, having the necessary software for its correct application. Using a sample of daily mutual fund returns from the UK market for an interval covering from January 1st, 1990, to December 31, 2023, in our study, we show that the Markowitz model can provide portfolios that beat reference market portfolios (FTSE 100 and FTSE All-Share Index), obtaining higher returns with a lower risk. Neither the FTSE 100 nor the FTSE All-Share Index are not efficient portfolios, not reflecting the behaviour of the theoretical market portfolio. Therefore, the Markowitz model, as a tool for investment selection, provides portfolios with better performance than market benchmarks.