Author(s)

Ruixuan Dong

Corresponding Author

Ruixuan Dong

ABSTRACT

Various portfolios appears on the market. People will choose different portfolios as they have varied risk-taking capabilities for portfolios. The purpose of the study is to find the greatest return of portfolios under five constraints by utilizing Markowitz model and Index model. In this article, 10 companies’ stocks are selected to form a portfolio. Portfolio with the least risk and portfolio with the greatest return under Markowitz model and Index model are presented respectively. The results of the study show that no matter in Markowitz model or in Index model, the minimum variance portfolios under the constraint that the weight of S&P 500 index is zero has the best performance. Thus, when the weight of S&P 500 Index is zero, the greatest return can be obtained with the least risk-taking both in Markowitz model and Index model. Besides, maximum Sharpe ratio portfolios in Markowitz model and Index model also show the best performance when the weight of S&P 500 Index is zero, which means that the return of portfolio with certain risk-taking is the highest under the constraint that weight of S&P 500 Index is zero. This study could provide a guideline for people when choose their own portfolio.

KEYWORDS

Markowitz Model, Index Model, portfolio, return