Suppose that you are an investment manager at a large asset management company. One of your clients
(John McLean) has recently sent you an email regarding his portfolio. In John McLean’s email to you, the
questions are as follows (in the below box).
– I understand that you use Markowitz Portfolio Optimization Model to manage my portfolio. Can you
briefly explain this model in simple terms?
– I would like to take a much higher level of risk for my portfolio. My question is: according to the
Markowitz Portfolio Optimization Model, what should be done? (Should some very risky stocks be
bought or sold? Should some very risky bonds be bought or sold? Should some very risky commodities
be bought or sold? Is there another way?)
– (I will be ok with some formulas, but please try to minimize the use of them. Also, could you please not
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