Applying the mean-variance framework: portfolio optimization and comparative performance analysis in the emerging Colombian capital market: PORTFOLIO OPTIMIZATION AND COMPARATIVE PERFORMANCE ANALYSIS IN THE EMERGING COLOMBIAN CAPITAL MARKET

Purpose this paper adopts the mean-variance approach in optimizing portfolios within the Colombian capital market, a setting full of complications such as lack of liquidity and market concentration. It delivers actionable messages for emerging market stakeholders and formulates guidance aimed at enhancing risk-adjusted returns and informing portfolio management in markets with similar structural and economic conditions. Research methodology a bi-objective mean-variance model has been used for analyzing the stock prices of 17 stocks on a weekly basis from 2009-2024. Annual rebalancing has made the portfolio responsive to changes in the market, considering the Sharpe ratio as the benchmark to assess risk-adjusted performance. Findings optimized portfolios in Colombia outperformed traditional investment funds by realizing better returns while having a balanced risk. Surely, this shows that the model is able to be flexible and react to changes in fluctuation, capture sectoral opportunities, and perform amazingly in a dynamic market. Research limitations focusing on adaptability and real-time rebalancing in this work can establish a basis on which future research will operate, refining optimization strategies that incorporate advanced risk measures such as CVaR. Practical implications the results present an effective and flexible tool for investors to optimize their portfolios in respect of risk diversification and sustainable returns, considering liquidity constraints and market turmoil. Originality/Value this research connects theory and practice and demonstrates the flexibility of the mean-variance model in emerging economies. It emphasizes novelty in portfolio optimization solutions and further development of strategies in sophisticated financial conditions.