"Portfolio Optimization Tools in Excel" by Tom Arnold, Joseph Farizo et al.
 

Abstract

The calculus and matrix algebra associated with finding the optimal portfolio weights for a set of securities is tedious. However, Excel tools make the computations simple, with minimal programming needed to arrive at optimal portfolio weights for securities in a portfolio. We provide this Excel template and techniques for acquiring optimal weights, which is useful for personal and institutional investors alike.

Takeaways:

  • The calculus and matrix algebra associated with optimizing portfolio weights is tedious, but not necessary for finding optimal portfolio weights
  • Based on the results of the associated mathematics for optimizing portfolio weights, a very accessible Excel template can be produced to perform the optimization for an individual investor. Excel’s =MDETERM function makes the programming very easy.
  • Although demonstrated using three funds and a risk-free rate, the Excel template can be extended to allow for many more funds and/or securities.

Document Type

Article

Publication Date

10-8-2024

Comments

Please note that this article is now forthcoming in the Journal of Wealth Management. The attached file is an abstract. The associated spreadsheet is still available.

Click below to download supplemental content.

QUICK-PORTFOLIO-PAPER.xlsx (19 kB)

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