The Le Chatelier Principle in the Markowitz Quadratic Programming Investment Model: A Case of World Equity Fund Market

Chapter

Abstract

Due to limited numbers of reliable international equity funds, the Markowitz investment model is ideal in constructing an international portfolio. Overinvestment in one or several fast-growing markets can be disastrous as political instability and exchange rate fluctuations reign supreme. We apply the Le Châtelier principle to the international equity fund market with a set of upper limits. Tracing out a set of efficient frontiers, we inspect the shifting phenomenon in the mean–variance space. The optimum investment policy can be easily implemented and risk minimized.

Keywords

Markowitz quadratic programming model Le Châtelier Principle International equity fund and added constraints 
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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Texas A&M International UniversityLaredoUSA
  2. 2.Clarion University of PennsylvaniaClarionUSA

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