Portfolio Construction in Terms of Bitcoin, S&P 500, Gold Futures and American 10-year National Debt

Abstract

Contemporarily, the financial sector occupies a vital part of the world, and asset allocation in it is the top priority. Portfolio construction is the main procedure of asset allocation. In order to gain better application of asset allocation, this paper selects two representative models from the most classic asset allocation models (i.e., Index model and Markowitz model), as well as processes and analyzes them with actual data and targets to obtain real model results. Specifically, this article compares the curves under five different constraints from two models. According to the analysis, the Index model has better performance and fit well in this case, while curves of the Markowitz model have more outliers, which may cause bad impacts in real cases. Based on the evaluations, the pros and cons of the two models and the different conditions for adaptation can be compared to a certain extent. These results shed light on guiding further exploration of portfolio designs.