Portfolio Optimization of Stocks in Different Industries by Single-Index Model and Markowitz Model
In the financial sector, portfolio optimization is becoming more and more crucial. This article examines the portfolios of two industries, financial services and technology, in an effort to help prospective investors make decisions about their investments under a variety of constraints. The portfoli...
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| Language: | English |
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EDP Sciences
2024-01-01
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| Series: | SHS Web of Conferences |
| Online Access: | https://www.shs-conferences.org/articles/shsconf/pdf/2024/28/shsconf_dsm2024_01031.pdf |
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| _version_ | 1846125619707904000 |
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| author | Chen Mingrui |
| author_facet | Chen Mingrui |
| author_sort | Chen Mingrui |
| collection | DOAJ |
| description | In the financial sector, portfolio optimization is becoming more and more crucial. This article examines the portfolios of two industries, financial services and technology, in an effort to help prospective investors make decisions about their investments under a variety of constraints. The portfolio with the lowest volatility and the highest Sharpe ratio, and the constraint for the smallest value variance are the three practical restrictions that are paired with the Markowitz model and the Sharpe-single Index model approach to establish the ideal stock portfolios. The outcome demonstrates that, First, a risk-return portfolio can benefit from investing in the S&P index due to its strong correlation with listed companies; second, investing in the S&P index is preferred to hedge risk if short selling is prohibited; and third, it is advantageous to include the S&P index in the investment portfolio. This holds immense importance for the investigation of the most efficient distribution of monetary resources within the financial industry. |
| format | Article |
| id | doaj-art-7c436f6e5d884406a8892e14f7f8cd89 |
| institution | Kabale University |
| issn | 2261-2424 |
| language | English |
| publishDate | 2024-01-01 |
| publisher | EDP Sciences |
| record_format | Article |
| series | SHS Web of Conferences |
| spelling | doaj-art-7c436f6e5d884406a8892e14f7f8cd892024-12-13T10:11:01ZengEDP SciencesSHS Web of Conferences2261-24242024-01-012080103110.1051/shsconf/202420801031shsconf_dsm2024_01031Portfolio Optimization of Stocks in Different Industries by Single-Index Model and Markowitz ModelChen Mingrui0Faculty of Business, Economics & Law, The University of QueenslandIn the financial sector, portfolio optimization is becoming more and more crucial. This article examines the portfolios of two industries, financial services and technology, in an effort to help prospective investors make decisions about their investments under a variety of constraints. The portfolio with the lowest volatility and the highest Sharpe ratio, and the constraint for the smallest value variance are the three practical restrictions that are paired with the Markowitz model and the Sharpe-single Index model approach to establish the ideal stock portfolios. The outcome demonstrates that, First, a risk-return portfolio can benefit from investing in the S&P index due to its strong correlation with listed companies; second, investing in the S&P index is preferred to hedge risk if short selling is prohibited; and third, it is advantageous to include the S&P index in the investment portfolio. This holds immense importance for the investigation of the most efficient distribution of monetary resources within the financial industry.https://www.shs-conferences.org/articles/shsconf/pdf/2024/28/shsconf_dsm2024_01031.pdf |
| spellingShingle | Chen Mingrui Portfolio Optimization of Stocks in Different Industries by Single-Index Model and Markowitz Model SHS Web of Conferences |
| title | Portfolio Optimization of Stocks in Different Industries by Single-Index Model and Markowitz Model |
| title_full | Portfolio Optimization of Stocks in Different Industries by Single-Index Model and Markowitz Model |
| title_fullStr | Portfolio Optimization of Stocks in Different Industries by Single-Index Model and Markowitz Model |
| title_full_unstemmed | Portfolio Optimization of Stocks in Different Industries by Single-Index Model and Markowitz Model |
| title_short | Portfolio Optimization of Stocks in Different Industries by Single-Index Model and Markowitz Model |
| title_sort | portfolio optimization of stocks in different industries by single index model and markowitz model |
| url | https://www.shs-conferences.org/articles/shsconf/pdf/2024/28/shsconf_dsm2024_01031.pdf |
| work_keys_str_mv | AT chenmingrui portfoliooptimizationofstocksindifferentindustriesbysingleindexmodelandmarkowitzmodel |