Optimizing Returns of Diversified Investment Portfolio with Markowitz Model

Ge Bu and Yuming Liu ()
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Ge Bu: Macau University of Science and Technology
Yuming Liu: Southwest University

A chapter in Proceedings of the 2023 2nd International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2023), 2024, pp 123-135 from Springer

Abstract: Abstract In recent years, the underlying assets allocation has become a hot topic, where tremendous investors and analyzers are tried to construct portfolio with well performances (e.g., maximum Sharpe ratio, minimum volatility, maximum Calmar ratio) under the framework of quantitative analysis. As a matter of fact, the portfolio theory utilizes historical data of different underlying assets (e.g., stocks, futures, spots, options as well as cryptocurrencies) to analyze the assets being invested. This paper presents a method to generate the Markowitz model using the Monte Carlo method and combines it with the utility function to obtain a low-risk, high-return investment portfolio. According to the analysis, the allocation of investment business products is illustrated using diversified investment products as an example. Overall, this study provides guidance and suggestions for real-world investment for investors, aiming to avoid risks and achieve relatively high returns. These results shed light on guiding further exploration of portfolio construction.

Keywords: Markowitz model; Monte Carlo method; optimal product allocation; utility function (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-268-2_16

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DOI: 10.2991/978-94-6463-268-2_16

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