Which of the following is a second way of formulating the Markowitz model?
A)Maximizing the expected return of the portfolio subject to a constraint on variance
B)Minimizing the expected return of the portfolio subject to a constraint on variance.
C)Maximizing the variance of the portfolio subject to a constraint on the expected return of the portfolio
D)Maximizing the variance of the portfolio with no constraint needed for the expected return of the portfolio

Question

Quizplus · Accepted Answer

The Markowitz model can be formulated as maximizing the expected return of the portfolio subject to a constraint on variance or minimizing the variance of the portfolio subject to a constraint on expected return. Therefore, option A is the correct choice. Option B is incorrect because it involves minimizing the expected return, which goes against the goal of investment. Option C involves maximizing the variance of the portfolio, which is not the main objective of the Markowitz model. Option D involves maximizing variance with no constraint on expected returns, which is not consistent with the Markowitz model.

Which of the Following Is a Second Way of Formulating