According to Markowitz model of risk return optimizationIn Markowitz Model, to determine portfolio variance, pair wisecomparison of thousands of securities is to be done which is aformidable task.
The inherent problem in Markowitz Model is in the number of inputs required and the error in assessment or estimation of correlation coefficients.
If there are 50 securities in a portfolio, then input list willinclude:n=50 estimates of expected returnsn=50 estimates of variances(n
-n)/2=1225 estimates of co variances
SoSo eveneven forfor aa smallsmall portfolioportfolio of of 5050 securitiessecurities wewe requirerequire
= w + w + 2ww