A diagnostic model for improving the efficiency of an existing portfolio

This paper focuses on one particular aspect of portfolio revision, that is, the case where an investor already owns an ‘existing’ portfolio of assets and has additional funds to improve the efficiency of the portfolio by investing in some further combination of risky assets. The paper pursues the objective of identifying a so-called ‘target’ portfolio, in which, it can be argued, additional funds should be invested. An analytic technique for finding a numerical solution for this optimal ‘target’ portfolio is consequently derived and empirically demonstrated on two different data sets.