Optimized Portfolio Structured by 5 Stock Indexes

Research Article
Open access

Optimized Portfolio Structured by 5 Stock Indexes

Nan Luo 1*
  • 1 Hunan Agricultural University    
  • *corresponding author 200940819426@stu.hunau.edu.cn
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/24/20230406
AEMPS Vol.24
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-91-1
ISBN (Online): 978-1-915371-92-8

Abstract

Equity market declines fiercely caused by the current liquidity crisis. Investors pay more attention to optimized portfolio in order to reduce losses. 5 representative indexes were chosen from capital market to construct financial portfolios. The sketch of the efficient frontier was plotted, and portfolios with the 1/N, the maximum sharpe ratio and the minimum volatility were acquired based on 10000 scipy optimization calculations, the FTSE100 accounts for the largest section of the portfolio with the maximum sharpe ratio while the SSE Composite Index possesses the biggest shares in the portfolio with minimum volatility. Comparing three portfolio returns of accumulations, it could be observed that the maximum sharpe ratio portfolio’s performance surpassed the 1/N and the minimum variance portfolio, several investors could make reasonable decisions refer to this result in the special tough period.

Keywords:

market capitalization, 1/N portfolio, maximum sharpe ratio, minimum variance

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References

[1]. World Economic Outlook Update projects, https://www.imf.org/en/Publications/WEO/Issues/2023/01/31/world-economic-outlook-update-january-2023, last accessed 2023/1/30.

[2]. Volatile Markets Signal Rising Financial Stability Risks, https://www.imf.org/en/Blogs/Articles/2022/10/11/interest-rate-increases-volatile-markets-signal-rising-financial-stability-risks, last accessed 2022/10/11.

[3]. De Groot, O. J., Bozzoli, C., Alamir, A., Brück, T.: The global economic burden of violent conflict. Journal of Peace Research 59(2), 259-276 (2022).

[4]. Blomberg, S. B., Hess, G. D., Orphanides, A.: The macroeconomic consequences of terrorism. Journal of monetary economics 51(5), 1007-1032 (2004).

[5]. Zhang, Z., Zohren, S., Roberts, S.: Deep learning for portfolio optimization. The Journal of Financial Data Science 2(4), 8-20 (2020).

[6]. Berkelaar, A. B., Kouwenberg, R., Post, T.: Optimal portfolio choice under loss aversion. Review of Economics and Statistics 86(4), 973-987 (2004).

[7]. Elliot, N., Briller, V., Joshi, K.: Portfolio assessment: Quantification and community. Journal of writing assessment 3(1), (2007).

[8]. Sharpe, W. F.: Mutual fund performance. The Journal of business 39(1), 119-138 (1966).

[9]. Kourtis, A.: The Sharpe ratio of estimated efficient portfolios. Finance Research Letters 17, 72-78 (2016).

[10]. FAIZ, M.: ANALISIS PERBANDINGAN KINERJA SAHAM SYARIAH DAN SAHAM KONVENSIONAL PADA SEKTOR MANUFAKTUR DI MASA PANDEMI COVID-19. Universitas Gadjah Mada, Thesis for Doctoral degree (2022).

[11]. Kahane, Y., Nye, D.: A Portfolio Approach to the Property-Liability Insurance Industry. The Journal of Risk and Insurance 42(4), 579–598 (1975).

[12]. Kouaissah, N., Hocine, A.: Optimizing sustainable and renewable energy portfolios using a fuzzy interval goal programming approach. Computers & Industrial Engineering 144, 106448 (2020).

[13]. Wu, Y., Xu, C., Ke, Y., Tao, Y., Li, X.: Portfolio optimization of renewable energy projects under type-2 fuzzy environment with sustainability perspective. Computers & Industrial Engineering 133, 69-82 (2019).

[14]. Hou, K., Robinson, D. T.: Industry concentration and average stock returns. The journal of finance 61(4), 1927-1956 (2006).

Cite this article

Luo,N. (2023). Optimized Portfolio Structured by 5 Stock Indexes. Advances in Economics, Management and Political Sciences,24,13-19.

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The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development

ISBN：978-1-915371-91-1(Print) / 978-1-915371-92-8(Online)
Editor：Canh Thien Dang, Javier Cifuentes-Faura
Conference website: https://2023.icmred.org/
Conference date: 28 April 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.24
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. World Economic Outlook Update projects, https://www.imf.org/en/Publications/WEO/Issues/2023/01/31/world-economic-outlook-update-january-2023, last accessed 2023/1/30.

[2]. Volatile Markets Signal Rising Financial Stability Risks, https://www.imf.org/en/Blogs/Articles/2022/10/11/interest-rate-increases-volatile-markets-signal-rising-financial-stability-risks, last accessed 2022/10/11.

[3]. De Groot, O. J., Bozzoli, C., Alamir, A., Brück, T.: The global economic burden of violent conflict. Journal of Peace Research 59(2), 259-276 (2022).

[4]. Blomberg, S. B., Hess, G. D., Orphanides, A.: The macroeconomic consequences of terrorism. Journal of monetary economics 51(5), 1007-1032 (2004).

[5]. Zhang, Z., Zohren, S., Roberts, S.: Deep learning for portfolio optimization. The Journal of Financial Data Science 2(4), 8-20 (2020).

[6]. Berkelaar, A. B., Kouwenberg, R., Post, T.: Optimal portfolio choice under loss aversion. Review of Economics and Statistics 86(4), 973-987 (2004).

[7]. Elliot, N., Briller, V., Joshi, K.: Portfolio assessment: Quantification and community. Journal of writing assessment 3(1), (2007).

[8]. Sharpe, W. F.: Mutual fund performance. The Journal of business 39(1), 119-138 (1966).

[9]. Kourtis, A.: The Sharpe ratio of estimated efficient portfolios. Finance Research Letters 17, 72-78 (2016).

[10]. FAIZ, M.: ANALISIS PERBANDINGAN KINERJA SAHAM SYARIAH DAN SAHAM KONVENSIONAL PADA SEKTOR MANUFAKTUR DI MASA PANDEMI COVID-19. Universitas Gadjah Mada, Thesis for Doctoral degree (2022).

[11]. Kahane, Y., Nye, D.: A Portfolio Approach to the Property-Liability Insurance Industry. The Journal of Risk and Insurance 42(4), 579–598 (1975).

[12]. Kouaissah, N., Hocine, A.: Optimizing sustainable and renewable energy portfolios using a fuzzy interval goal programming approach. Computers & Industrial Engineering 144, 106448 (2020).

[13]. Wu, Y., Xu, C., Ke, Y., Tao, Y., Li, X.: Portfolio optimization of renewable energy projects under type-2 fuzzy environment with sustainability perspective. Computers & Industrial Engineering 133, 69-82 (2019).

[14]. Hou, K., Robinson, D. T.: Industry concentration and average stock returns. The journal of finance 61(4), 1927-1956 (2006).

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