Previously, we discussed fundamentals of MPT, including the concept of the efficient frontier and the notion of optimality within this framework.

Now, we will discover special cases known as Markowitz Portfolios.

MSR and GMV

There are two special cases of optimal portfolios.

In terms of example from a previous chapter, here we are going to schematically show points, which might correspond to MSR and MGV portfolios:

For code examples with detailed explanation - watch the following video:

Here is a corresponding Google Colab.

When to Choose Each?

Now that we’ve covered entailment of each portfolio, let’s explore their use cases.

In simple terms:

• The GMV portfolio is preferable if you are risk-averse, working in volatile economic conditions or prefer stable income over financial growth;
• The MSR portfolio is more suitable if you are comfortable taking on higher risks for potentially greater returns or anticipating economic growth.