OPTIMAL PORTFOLIO ALLOCATIONS IN EMERGING EQUITY MARKETS: A MATHEMATICAL PROGRAMMING APPROACH
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This paper develops an optimization model for portfolio allocations in 22 emerging equity markets by incorporating the conflicting objectives of maximizing return and minimizing risk in a single objective function. The resulting model allows users to input their risk aversion value to obtain the optimal portfolio mix. The model is extended to include minimum and maximum allocations per geographical region as well as minimum and maximum number ofmarkets per region, given that the investor desires to minimize portfolio risk with a minimum portfolio return to be achieved.
Abstract
This paper develops an optimization model for portfolio allocations in 22 emerging equity markets by incorporating the conflicting objectives of maximizing return and minimizing risk in a single objective function. The resulting model allows users to input their risk aversion value to obtain the optimal portfolio mix. The model is extended to include minimum and maximum allocations per geographical region as well as minimum and maximum number ofmarkets per region, given that the investor desires to minimize portfolio risk with a minimum portfolio return to be achieved.