Application Research of Portfolio Related Theory--Based on Hong Kong Stock Data

Abstract

With the development of the stock market, people have carried out in-depth and comprehensive research on the portfolio theory. This paper aims to verify and analyze the practical application of the relevant theories. By collecting the stock price information of Hong Kong stocks as the target, this paper verifies and discusses basic theories such as tangent portfolio theory, portfolio diversification effect, Markowitz portfolio theory and Sharpe ratio. In the minimum variance portfolio and the tangent portfolio, this paper obtained the weight of each asset under the conditions of assets and without risk-free assets. Finally, the differences in the weights of investment targets in the portfolio are analyzed and discussed. The results show that, first, in the minimum variance portfolio, when considering risk-free assets, only investing in risk-free assets is considered, and when risk-free assets are not considered, assets with lower variance are given higher weights. Second, in a tangent portfolio, regardless of whether risk-free assets are considered, assets with higher Sharpe ratios in the portfolio are given higher weights. This can give some guidance and suggestions for future investment behavior.