Optimizing equity portfolios

The selection of an optimal portfolio is a typical decision problem, and as such, its solution consists of the following elements: the identification of a set of alternatives, using selection criteria to sort through the different possibilities, and the solution of the problem. To optimize a financial portfolio, we start by measuring the yield and risk of the products available. The risk-return variables can be considered two sides of the same coin since a certain level of risk will correspond to a given return. The return can be defined as the sum of the results produced by the investment concerning the capital employed, while the concept of risk can be translated into the degree of variability of returns associated ...

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