Author(s)

Siqi Li, Yushan Luo

Corresponding Author

Siqi Li

ABSTRACT

Because of the coexistence of return and risk, how to establish an optimal portfolio to maximize benefits and minimize risks has always been a problem for many investors. However, the existing literature rarely uses different venture capital portfolio models to compare and analyze the same group of stocks, to get which model is more conducive to investors' decision-making analysis. This paper explores the optimal portfolio of the stock portfolio under 5 constraints by using Index Model and Markowitz Model. The key finding taken from our results are as follows: Markowitz Model shows that the return of the optimal portfolio is 7.51% under the minimum variance of constraints 1, 2, and 3 separately, which is higher than the 7.15% from Index Model. In these cases, the sharp ratio from Markowitz Model is 68.54%, while Index Model shows 74.23%. Meanwhile, under the maximum sharp of constraints 1, 2, and 3, we get the returns are 14.01%, 16.56%, and 16.99% in Markowitz Model, correspondingly 12.07%, 12.87%, and 12.87% in Index Model. For Constraints 4 and 5, on the one hand, we get the returns from Markowitz Model always higher than the returns from Index Model. On the other hand, the sharp ratio calculated by Markowitz Model is lower than Index Models. By comparing the results, it is concluded that the Markowitz model is more applicable.

KEYWORDS

Portfolio Investing, Investment Risk, Index Model, Markowitz Model