Philippine E-Journals

Stock Diversification and Integer Programming

Emilina R. Sarreal

Discipline: Economics, Accountancy, Business, Business Management, Finance Marketing, Commercial Law

 

Abstract:

This study shows how investors can maximize returns by preparing and monitoring their own stock portfolio by using an integer programming model with an algorithm that can be computed in spreadsheet and linear programming software. Further, the study emphasizes the importance of diversifying stockholdings to reap optimal returns and minimum volatility/risk. It also suggests employing behavioral portfolio theory where goals/aspirations of investors are combined with their reward-to-volatility profile.