An empirical application of Markowitz mean-variance theory in evaluating portfolio performance: Evidence from Vietnam’s VN30 equity constituents

This study explores the application of Markowitz's Modern Portfolio Theory (Mean-Variance Theory) under a no short-selling constraint in Vietnam's stock market, focusing on the VN30 index from 2012 to 2024. It compares three investment strategies: (A) naive 1/N allocation, (B) Markowitz optimization targeting the same standard deviation as strategy A, and (C) Markowitz optimization maximizing the Sharpe ratio. The findings reveal that strategy C significantly outperforms cumulative returns and risk-adjusted performance, demonstrating that when properly adjusted, the Markowitz model can still generate alpha in emerging markets like Vietnam. However, the study emphasizes prudent risk management and warns against overreliance on theoretical Optimization without considering market realities.