Abstract
Recently, investors are requiring diversified options on the security investment, while the sudden incidents, such as the trade war and the pandemic of COVID-19, make the investment market more volatile and turbulent. Thus, this article will discuss how investors can make rational investment decisions by using the Markowitz’s portfolio theory and its Mean-Variance Model in the U.S. investment market, in order to meet the requirement of diversification and to earn relatively stable profit. Therefore, the data spanning from 2016 to 2020 is used to provide investors with more reliable and comprehensive investment information. Meanwhile, a novel cross-section portfolio is given to fulfill the diversified and innovative investment needs of investors. The industries included are car industry, biopharmaceutical industry and financial service industry. Furthermore, the results reflect the actual situation to a large extent, including the weakness in the US market in December 2018 due to uncertain Fed policy and the impact of the COVID-19 in 2020. In this article, an Intra-Industry analysis based on the net asset values of the three targeted industries will be carried out first, then the Macro analysis will be conducted based on the optimal portfolio of the three industries. A conclusion of the findings is included at the end of the article.
Highlights
In recent years, the risk of world financial market has gradually increased with the turbulence of world situation
Five leading enterprises are used as representatives of each industry. These three representative industries can partially reflect the overall condition of the U.S economy industries and whether their stock performance is sensitive to the major events
3.2Intra-Industry Analysis Based on the Efficient Frontiers shown above (Figure 13), the optimal portfolio for each time period is selected with the largest proportion of sharpness of the curve, respectively
Summary
The risk of world financial market has gradually increased with the turbulence of world situation. Since 2016, Brexit has brought great uncertainty to the global financial market, especially to the European financial market [1]. The Sino US trade war has cast a shadow over the two most powerful countries in the world, and the entire global financial market has suffered from its huge negative impact [2]. The market generally predicts that the COVID-19 pandemic will bring disastrous consequences to the U.S economy [4]. In any case, the COVID-19’s outbreak will bring great uncertainty to the U.S economy. How the market is affected by these factors, and, at the same time, how to select reasonable asset investment in this highly risky market, are the problems that this article focuses on
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