Trade Volume Constraint on Optimal Portfolio Preference Based on Markowitz Model

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In terms of securities, portfolio is a pool composed of at least two securities to reduce risk and to obtain the highest return on the anticipated risk. Investors intend to compose the optimal portfolio mix with the least risk level that is maximizing their expected returns. The preferred constraints set up within framework of expected returns have organic importance in the composition of security mix. Both individual approaches and decisions arising from the economic indicators can be effective as preference constraints during the portfolio selection. Within the framework of all these expected return, risk and constraints, the formation of the most appropriate security mix is called portfolio optimization. In our study, several portfolios composed of stocks listed in ISE-30 index were constructed. According to the Markowitz’s portfolio optimization method based on average variance, to measure the trading volume’s effect on the construction of the optimum portfolio, the trading volume was included among the preference constraints. The resulting analysis presented that the trading volume is one of the constraints that can affect the selection of investors.

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Portfolio optimization , markowitz model , trading volume constraint.

Ege Academic Review (EAR)

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Ege Academic Review (EAR)