Portfolio Optimization Based on Main Board Stocks in China

Research Article
Open access

Portfolio Optimization Based on Main Board Stocks in China

Jiayi Wu 1*
  • 1 Northeastern University    
  • *corresponding author 202119275@stu.neu.edu.cn
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/26/20230574
AEMPS Vol.26
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-95-9
ISBN (Online): 978-1-915371-96-6

Abstract

Portfolio is one of the most critical factors in the investment process, which can effectively reduce investment risk, improve investment return, and achieve more diversified investment strategies according to the different needs and goals of investors. This paper focuses on Chinese stock market and selects five active stocks on the Main Board from Shanghai Stock Exchange. Closing prices from August 1,2022 to December 31,2022 of each stock are obtained from Tushare. Four portfolios are constructed in this paper, of which is equally-weighted, market-value-weighted, minimal risk and maximal Sharpe ratio. Monte Carlo simulation is constructed to obtain combinations with minimal risk and maximal Sharpe ratio. After obtaining weights of these tow combinations, it turns out that Sichuan Changhong Electric accounted for the max proportion in minimal risk portfolio while in maximal Sharpe ratio portfolio, China United Communications took up the largest proportion. Finally, according to the overall cumulative return curve, maximal Sharpe ratio portfolio is the optimal portfolio. This paper gives detailed insights of portfolio allocation and selection for investors.

Keywords:

markowitz model, Monte Carlo simulation, Sharpe ratio, portfolio optimization, main board stocks

Wu,J. (2023). Portfolio Optimization Based on Main Board Stocks in China. Advances in Economics, Management and Political Sciences,26,218-226.
Export citation

References

[1]. Markowitz, H.: Portfolio Selection. The Journal of Finance 7(1), 77-91 (1952).

[2]. Shan, C.Y., Tang, Y.J., Wang, Q., Zhang, C.: The Diversification Benefits and Policy Risks of Accessing China.s Stock Market. Journal of Empirical Finance 66, 155-175(2022).

[3]. Prasad, E. S., Rajan, R. G.: Modernizing China's growth paradigm. American Economic Review 96(2), 331-336 (2006).

[4]. Zhang, Y.C.: An Empirical Study of Effective Asset Portfolios in Shanghai and Shenzhen Stock Markets: 1994-1996. Economical Science (05), 33-39 (1997).

[5]. Yu, H.Q., Li, L.: Markowitz’s Portfolio Model and Its Empirical Research Based on Security Market in China, Journal of Gansu Science 25(3), 146-149 (2013).

[6]. Zeng, Y.M., Zhang, J., Zhang, Q.: Empirical Study of the Markowitz Model in the Optimal Portfolio Selection in the Stock Market, Journal of Xiangtan Normal University (Social Science Edition) 31(4), 88-91 (2009).

[7]. Investopedia, https://www.investopedia.com/, last accessed 2016/11/21.

[8]. Sun, L.B.: An Empirical Study of Markowitz's Portfolio Theory based on Python. Times Finance 779(25), 46-47 (2020).

[9]. Li, S.M., Xu, P.: Markowitz Portfolio Theory Model Application Research, Economical Science (01), 42-51 (2000).

[10]. Li, Y., Yu, L.X.: Optimal Portfolio Analysis based on Markowitz Theory. Monthly Accounting Magazine 674(22), 53-55 (2013).


Cite this article

Wu,J. (2023). Portfolio Optimization Based on Main Board Stocks in China. Advances in Economics, Management and Political Sciences,26,218-226.

Data availability

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

Disclaimer/Publisher's Note

The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.

About volume

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

ISBN:978-1-915371-95-9(Print) / 978-1-915371-96-6(Online)
Editor:Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://2023.icmred.org/
Conference date: 28 April 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.26
ISSN:2754-1169(Print) / 2754-1177(Online)

© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license. Authors who publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open access policy for details).

References

[1]. Markowitz, H.: Portfolio Selection. The Journal of Finance 7(1), 77-91 (1952).

[2]. Shan, C.Y., Tang, Y.J., Wang, Q., Zhang, C.: The Diversification Benefits and Policy Risks of Accessing China.s Stock Market. Journal of Empirical Finance 66, 155-175(2022).

[3]. Prasad, E. S., Rajan, R. G.: Modernizing China's growth paradigm. American Economic Review 96(2), 331-336 (2006).

[4]. Zhang, Y.C.: An Empirical Study of Effective Asset Portfolios in Shanghai and Shenzhen Stock Markets: 1994-1996. Economical Science (05), 33-39 (1997).

[5]. Yu, H.Q., Li, L.: Markowitz’s Portfolio Model and Its Empirical Research Based on Security Market in China, Journal of Gansu Science 25(3), 146-149 (2013).

[6]. Zeng, Y.M., Zhang, J., Zhang, Q.: Empirical Study of the Markowitz Model in the Optimal Portfolio Selection in the Stock Market, Journal of Xiangtan Normal University (Social Science Edition) 31(4), 88-91 (2009).

[7]. Investopedia, https://www.investopedia.com/, last accessed 2016/11/21.

[8]. Sun, L.B.: An Empirical Study of Markowitz's Portfolio Theory based on Python. Times Finance 779(25), 46-47 (2020).

[9]. Li, S.M., Xu, P.: Markowitz Portfolio Theory Model Application Research, Economical Science (01), 42-51 (2000).

[10]. Li, Y., Yu, L.X.: Optimal Portfolio Analysis based on Markowitz Theory. Monthly Accounting Magazine 674(22), 53-55 (2013).