OBSERVATIONS ON THE OPTIMIZATION OF A PORTFOLIO LISTED ON BUCHAREST STOCK EXCHANGE
OBSERVATIONS ON THE OPTIMIZATION OF A PORTFOLIO LISTED ON BUCHAREST STOCK EXCHANGE

Summary/Abstract: The expectations of investors on capital market are always directed to maximize the profit. Questionable are how this can be realized and when obtained profit is significant. That is because level of profit is linked with level of risk assumed. So, it was observed that is more safety to invest in a portfolio of assets than investing in one single asset. Investing in one asset, even if is full of expectation, can be total loss in the end. On the other side, portfolio investments dissipate the risk. For that, in his classical work, Harry Markowitz proposed a theory with significant impact on future development of portfolio optimization known as Modern Portfolio Theory (MPT). After this, William Sharpe also has made its contribution known as the Sharpe ratio by introducing the constant risk-free return term. The main objective of the paper is to evaluate differences of those two approaches on a portfolio of assets listed on Bucharest Stock Exchange. The real data was collected of a period of 5 years.

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