Portfolio Optimization and Rebalancing with Transaction Cost: A Case Study in the Stock Exchange of Thailand

Portfolio optimization is one of the most intriguing topics in the field of finance. The purpose is to maximize return while minimizing risk. In this paper, we investigate the experimental performance of the classical Markowitz portfolio optimization with and without rebalancing based on the minimum risk in terms of portfolio return, portfolio risk, and Sharpe ratio, and compare the results to the experiments with transaction cost. The importance of this work stems from the fact that, while the MV model is extensively utilized, its use in the Thai stock market is limited. This analysis uses the historical close prices of 50 stocks from the Stock Exchange of Thailand 50 Index (SET50) between January 2018 and December 2021. The experiment showed that a portfolio with a rebalancing approach outperforms a portfolio without a rebalancing strategy.