Application of Markowitz Model Equipped with Transaction Cost and Turnover Rate in Chinese Stock Market

Research Article
Open access

Application of Markowitz Model Equipped with Transaction Cost and Turnover Rate in Chinese Stock Market

Yuting Yang 1*
  • 1 Beijing Normal University-Hong Kong Baptist University United International College Zhuhai 519000, China    
  • *corresponding author yangyuting79@icloud.com
Published on 21 March 2023 | https://doi.org/10.54254/2754-1169/3/2022824
AEMPS Vol.3
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-15-7
ISBN (Online): 978-1-915371-16-4

Abstract

Because of the development of Chinese stock market in recent years, more and more investors have entered the market. The classic Markowitz model can provide investors with investment methods that have shortcomings in practical application. Therefore, the classic model is modified to add transaction costs and turnover rate limits suitable for the Chinese market. This paper aims to study the influence of the restriction on the model before and after the application of the model comparison results. The restriction can push the predicted result from time point to time period, and can be adjusted according to the actual situation.

Keywords:

Markowitz Model, Transaction Cost, Turnover rate, Sharpe Ratio, Chinese stock market

Yang,Y. (2023). Application of Markowitz Model Equipped with Transaction Cost and Turnover Rate in Chinese Stock Market. Advances in Economics, Management and Political Sciences,3,489-496.
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References

[1]. Markowitz, H. (1952).Portfolio selection. The Journal of Finance,7(1),77–91.

[2]. Markowitz, H. (1959).Portfolio Selection, Efficient Diversification of Investments. J. Wiley

[3]. Kulali, I. (2016). Portfolio optimization analysis with Markowitz quadratic mean-variance model. European Journal of Business and Management, 8(7), 73-79.

[4]. Ivanova, M., & Dospatliev, L. (2017). Application of Markowitz portfolio optimization on Bulgarian stock market from 2013 to 2016. International Journal of Pure and Applied Mathematics, 117(2), 291-307.

[5]. de Melo Neto, J. J., & Fontgalland, I. L. (2022). Share portfolio advisory: Use of the Markowitz method to optimize the risk/return ratio in individual investor shares portfolio. Research, Society and Development, 11(2), e26011225921-e26011225921.

[6]. Li J, Peng Y, & Cao XZ. (2017). Research on the optimal investment portfolio of corporate annuities based on investment constraints. Financial Theory and Practice (7), 4.

[7]. Li, Shu-Li. (2020). A study of Markowitz portfolio model with mean and variance changes. Bohai Rim Economic Outlook (2), 2.

[8]. Iqbal, J., Sandhu, M. A., Amin, S., & Manzoor, A. (2019). Portfolio Selection and Optimization through Neural Networks and Markowitz Model: A Case of Pakistan Stock Exchange Listed Companies. Review of Economics and Development Studies, 5(1), 183-196.

[9]. Yu, H.& Li, L.(2013). Markowitz’s Portfolio Model and Its Empirical Research Based on Security Market in China. Journal of Gansu Sciences,25(3),146–149.

[10]. Altman, E. I., & Saunders, A. (1997). Credit risk measurement: Developments over the last 20 years. Journal of banking & finance, 21(11-12), 1721-1742.


Cite this article

Yang,Y. (2023). Application of Markowitz Model Equipped with Transaction Cost and Turnover Rate in Chinese Stock Market. Advances in Economics, Management and Political Sciences,3,489-496.

Data availability

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 6th International Conference on Economic Management and Green Development (ICEMGD 2022), Part Ⅰ

ISBN:978-1-915371-15-7(Print) / 978-1-915371-16-4(Online)
Editor:Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2022
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.3
ISSN:2754-1169(Print) / 2754-1177(Online)

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References

[1]. Markowitz, H. (1952).Portfolio selection. The Journal of Finance,7(1),77–91.

[2]. Markowitz, H. (1959).Portfolio Selection, Efficient Diversification of Investments. J. Wiley

[3]. Kulali, I. (2016). Portfolio optimization analysis with Markowitz quadratic mean-variance model. European Journal of Business and Management, 8(7), 73-79.

[4]. Ivanova, M., & Dospatliev, L. (2017). Application of Markowitz portfolio optimization on Bulgarian stock market from 2013 to 2016. International Journal of Pure and Applied Mathematics, 117(2), 291-307.

[5]. de Melo Neto, J. J., & Fontgalland, I. L. (2022). Share portfolio advisory: Use of the Markowitz method to optimize the risk/return ratio in individual investor shares portfolio. Research, Society and Development, 11(2), e26011225921-e26011225921.

[6]. Li J, Peng Y, & Cao XZ. (2017). Research on the optimal investment portfolio of corporate annuities based on investment constraints. Financial Theory and Practice (7), 4.

[7]. Li, Shu-Li. (2020). A study of Markowitz portfolio model with mean and variance changes. Bohai Rim Economic Outlook (2), 2.

[8]. Iqbal, J., Sandhu, M. A., Amin, S., & Manzoor, A. (2019). Portfolio Selection and Optimization through Neural Networks and Markowitz Model: A Case of Pakistan Stock Exchange Listed Companies. Review of Economics and Development Studies, 5(1), 183-196.

[9]. Yu, H.& Li, L.(2013). Markowitz’s Portfolio Model and Its Empirical Research Based on Security Market in China. Journal of Gansu Sciences,25(3),146–149.

[10]. Altman, E. I., & Saunders, A. (1997). Credit risk measurement: Developments over the last 20 years. Journal of banking & finance, 21(11-12), 1721-1742.