One of the ways to formulate the Markowitz model is to
A)maximize the variance of the portfolio subject to a constraint on the expected return of the portfolio.
B)minimize the expected return of the portfolio subject to a constraint on variance.
C)minimize the variance of the portfolio subject to a constraint on the expected return of the portfolio.
D)minimize the expected return of the portfolio with no constraint on variance.

Question

Quizplus · Accepted Answer

The Markowitz model aims to minimize the risk (measured by variance) of a portfolio while achieving a certain level of return. Therefore, the correct formulation is to minimize the variance of the portfolio subject to a constraint on the expected return of the portfolio (choice C).

One of the Ways to Formulate the Markowitz Model Is