Portfolio optimization in the Russian stock market: methodology and empirical testing

Objective. This paper develops a practical methodology for constructing an investment portfolio considering the constraints typical for Russian private and institutional investors.

Methods. The paper analyzes the "people's portfolio" for the period October 2022 – April 2024 (weekly timeframe), calculates the statistical characteristics of the assets, portfolio variance, and the Sharpe ratio, and demonstrates a practical example of assessing portfolio performance.

Results. The authors propose a five-step algorithm for constructing a securities portfolio (defining objectives and constraints, collecting and preprocessing data, statistical analysis, formulating and solving the optimization problem, backtesting, and implementation). A sequential quadratic program (SLSQP) method is proposed for the numerical solution of the variance minimization problem under fixed income conditions.

Conclusions. This work contains a software module for calculations and practical recommendations for risk management, which will significantly facilitate the work of a novice investor in terms of building a securities portfolio based on the developed scientific approach. Forming an optimal stock and bond portfolio remains a central task in applied finance and capital management practice. This guide offers investors the opportunity to create an optimally structured stock and bond portfolio.