Optimum Portfolio Selection: Comparison between Konno-Yamazaki Model and Tangency Portfolio

Abstract

The primary goal of every investor is to achieve high investment returns by minimizing risk. Alternatively, it is the determination of the maximum level of risk one can bear for a given return. In this study, Konno-Yamazaki Portfolio model and Tangency Portfolio model, which were developed as an alternative to some difficulties in the quadratic approach used in the Optimum Portfolio Approach, which was introduced by Markowitz in 1952 and forms the basis of Modern Portfolio Theory, were used and 36-period data of 67 companies in the BIST Sustainability Index were used. Optimum portfolios were created with the help of the method. As a result, it was found that the Tangency portfolio performed better than the Konno-Yamazaki model in terms of return, but carried higher risk.