Comparison of portfolio optimization tarough the Markowitz's approach and value atrisk as the risk measure

Abstract

This study compares several approaches to portfolio optimization, the Markowitz’s (1952) approach and the approach based on the normal distribution of Value at Risk, with the different levels of confidence as a measure of risk, 90%, 95%, and 99%. To comply with these approaches, we obtain the real data of the prices of the assets of seven different companies that belong to the list of the Ibex 35, in order to obtain the optimal portfolios of both approaches. To calculate the different portfolios we have used the Excel program and the Solver, a tool found in Excel. The results are quite equal so we try to compare both approaches following a normal distribution through a normality test and the realization of different plots that affirm that the returns of the assets follow a normal distribution.