Portfolio Selection Using Mean Variance Theory Based on the 30-year Historical Returns of Selected Subsectors of the Philippine Industrial Sector

Portfolio selection is an important part of investment management that aims to select the right combination of assets to achieve an optimal risk-return ratio. This study integrates the Mean-Variance Theory utilizing the 30-year historical returns of the Philippine Stock Exchange. Three subsectors of the Industrial Sector were used as the investment pool. The back-test results showed that the MeanVariance portfolios of selected subsectors can outperform the industrial sector and not the market. Stakeholders must be cautious when investing in these three subsectors, considering the values obtained from the simulations. There are recommended portfolio selections wherein companies have a specific allocation that investors and financial managers can use whenever they decide to invest in these subsectors. Overall, this study offers a framework for investors to use as a guide in diversifying their stakes in the Philippine Stock Exchange.