creating optimal portfolio and the efficient frontier using microsoft excel®

Portfolio managers and investors strive to achieve the best possible trade-off between risk and return, and one of the tools they use is constructing mean-variance efficient portfolios. finance students learn about optimal portfolios and efficient frontiers, though it is difficult to replicate them unless they have access to sophisticated software. this paper develops a teaching module that uses microsoft excel® to create mean-variance portfolios and traces out the efficient frontier using real-world data. in the process, the students learn to determine optimal investment allocations in a portfolio, select the optimum investment portfolio given investor’s objectives and preferences and learn about factors that influence different asset allocations. for multiple assets (n>3), the paper uses matrix algebra in excel®. the paper enables students and investors to learn how to construct real-world mean-variance efficient portfolios using excel®.