Portfolio optimization

This diploma thesis is focused on portfolio optimization for a selected client. As a first task, a set of 35 company shares are chosen out of 6 business areas in order to ensure variety. With the help of Markowitz theory, optimal portfolios are created. In the beginning, it is mainly about optimization tasks that focus on only one of the two conflicting goals. Followed by modifications of the optimization function and of course putting those portfolios in a graph. By adding a risk-free asset we create a capital market line that achieves better results than the original Markowitz theory. The thesis also uses a security market line for the evaluation of individual shares, from which the optimal portfolio is compiled. Fama-French three-factor model is also presented. The resulting portfolios are tested on the next year data and with the help of the acquired knowledge an optimal portfolio is created for the selected client