Portfolio Selection in the Field of Social Media

Abstract

With the development of the Internet and the popularity of smart phones, social media has become the new mode of communication in the global world and covered many aspects of live of people such as working and education. The rise of the e-commerce economy has also increased the economic value of social media platforms. Therefore, this market is growing rapidly and has great investment value. This paper has created a portfolio of five stocks including Meta, Twitter, Tencent, Pinterest and Match Group in social media market to analyze the viability. Portfolio diversification plays an important role in reducing risk, and the capital asset pricing model (CAPM) explains the relationship between market and unsystematic (portfolio) risk. In Excel sheet, it builds two models to find the optimal weights of portfolio and Sharp ratio by using the Solver tool and the CAPM. The research shows that there is a certain correlation between each asset of the portfolio, and it is easily affected by the uncertainty of social media, which increases the risk of the portfolio. When investing a portfolio in real life, investors could select assets with slight correlation in different industries, which could reduce risk and uncertainty effectively.