Portfolio Establishment for Asset Allocation based on the Empirical Study

Abstract

The purpose of this study is to use Markowitz model and Single-factor index model to determine the optimal portfolio of S&P 500 and 6 stocks from 3 industries under 5 different constraints. The research is looked at stock prices on a daily basis from January 2000 to December 2020 and all data were obtained from secondary sources or non-participatory observation methods. Then this paper also considers the sensitive analysis to investigate the different impacts of factors. The sensitivity analysis tool used in this study was the Solver Table. Through calculation, the optimal portfolio ratio, minimum risk point, maximum Sharpe ratio, effective frontier, minimum return frontier and maximum variance frontier for each constraint under different models are obtained. In this process, it has been found that Single-factor Index model is simpler and more practical than Markowitz model. This paper provides inspiration for individual investors and financial institutions that Index model is more convenient to use in real life and likewise help them to make investment decisions.