DESIGN OF STOCKS? PORTFOLIO USING THE FOCA SYSTEM

Abstract

Composing an optimum stock portfolio is a difficult task due to stocks? risk and price fluctuations. In this paper a computer system (FOCA: Formulador de Carteras Optimas, from its spanish initials) for obtaining the optimum portfolio given an expected return or an acceptable risk is presented. The models used are that of Markowitz for the optimization of the portfolio and exponential smooth models for the forecast of the stocks? returns. The system supports a data base of stocks used for the portfolio model and provides graphic and forecasting facilities. The system obtains the optimum portfolio from a proposed set of stocks in the data base. The use of the system allows to know in an easy and fast way the composition of optimum portfolios for different levels of expected returns and/or acceptable risks, as well as the analysis of their composition, supporting the decision making on the buying and selling of stocks.