Comparison of Markowitz Model and Index Model in Different Constraints

Abstract

This paper reviews the application of Markowitz model and index model in portfolio optimization and focuses on comparing the performance under different constraints. The study covers the core concepts and theoretical framework of modern portfolio theory and the development of the two models. The Markowitz model employs quantitative analysis to consider the expected return and risk of assets and aims to maximize investor utility. The index model, on the other hand, achieves investment objectives by replicating the performance of a specific index. Comparative analysis shows that the Markowitz model is suitable for active management, while the index model is more suitable for passive investment. With the advancement of computing technology, the application of Markowitz model will be more accurate and extensive. Meanwhile, as the concept of passive investment becomes popular, the index model will continue to attract more investors. This study is of great significance to investors in choosing investment strategies, and will help academia and the industry to further optimize investment models.