Portfolio Optimization of Financial Services Stocks in the Nigerian Stock Exchange
C. P. Nnanwa, T. C. Urama, P. O. Ezepue

This paper attempts to maximize the expected return and minimize the variance of the portfolio by using Markowitz's portfolio selection model and a three-objective linear programming model to allocate different percentage of weight to different assets to obtain an optimal/feasible portfolio of the financial sector of the Nigerian stock exchange (NSE). An equally weighted portfolio was constructed using the daily closing prices from the financial services sector of NSE, The mean and the standard deviation of the data from the sector of the market served as our constrains in the three-objective model used. Additionally, three portfolios were constructed with the aims of maximizing the returns and minimizing the standard deviation (variance) and maximizing the Sharpe ratio. With the result from the simulation and analysis, these portfolios were compared alongside with the original equally weighted portfolio and the result of the comparison form the basis for our recommendations provided to the investors and market practitioners in the sector of NSE.

Full Text: PDF     DOI: 10.15640/arms.v4n2a1