A Linear Programming Model Suggestion Which Decreases Unsystematic Risk in the Portfolio Management

Traditional portfolio management attaches importance to diversification to decrease portfolio risk modern ones offer an alternative to investors in an efficient frontier to create a portfolio with mathematical and statistical methods by using the past quantitative knowledge. Markowitz, one of the pioneers of the potfolio management, has considered the standart deviation as a risk. The abundance in the number of the selected shares make it hard to calculate the standart deviation instead of standart one. So they suggested the linear programming model as a portfolio suggestion. The models of them don’t interfere with the number of shares and its distrubution of industry branches. As a result, the portfolio might consist of the sole shares theorotically. To prevent the bad sides mentioned in the study, a linear programming that provides the maximum expected return to investors, a new model suggestion has been made by widining the additional constraints of Konno and Yamazaki’s model.