Optimization of Portfolio Management Models with Indexed Stocks on the Lima Stock Exchange

Abstract

Investment fund managers are limited by the fact that Latin American financial markets offer very few investment possibilities, which forces them to carry out operations at a global level. The objective is to optimize the portfolio management models with indexed stocks in the Lima Stock Exchange (27 stocks considering 2082 days from January 02, 2014 to April 13, 2022) applying the Markowitz models that determine the portfolios of the frontier of investment possibilities. The Sharpe model (CAPM), which calculates the expected return considering systemic risks, and the Sharpe index, which measures the stock return with total risk. Finally, the Black-Litterman (BL) model adjusts the ex-post expected return with expert opinion. By comparing the BL/CAPM ratio, an index is obtained that improves the predictability of expected returns and it is observed that the efficiency of this indicator is greater than the Sharpe index of subsequent expected returns (Sharpe BL). Therefore, the hypothesis that optimizing the portfolio management models improves the predictability of the expected returns of the indexed shares of the Lima Stock Exchange is accepted.

Received: 23 July 2023 / Accepted: 10 January 2024 / Published: 5 March 2024