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Finding minimum variance with excel

On Microsoft » Microsoft Excel

1,116 words with 1 Comments; publish: Thu, 22 May 2008 23:56:00 GMT; (30693.75, « »)

I want to use Excel to find the combination of weights in

an asset portfolio which minimizes the overal variance of

returns. Each asset (stocks in this case) have a mean

return, and a variance (square of stdev) of past returns.

I want to be able to take a list of returns and variances,

plug in a target return, (or maximum return for that

matter) at the lowest possible variance or standard

deviation. I thought there used to be a function which

would return a minimum variance (Minvar?)of a list of

variances, but I cannot find it. (I can't remember is

probably closer to the truth). Any ideas?

regards

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  • 1 Comments
    • Scott Dobbs -

      > I want to use Excel to find the combination of weights in an asset

      portfolio which minimizes the overal variance of returns. ... <

      If Solver is installed, then solvsamp.xls should be on your hard drive.

      Search for it. There's a worksheet named "Portfolio of Securities" in the

      solvsamp.xls workbook that illustrates the simplest kind of portfolio

      optimization.

      - Mike Middleton, www.usfca.edu/~middleton

      #1; Thu, 22 May 2008 23:58:00 GMT