Research on the Application of Minimum Variance Model and Utility Maximization Model in Stock Market Portfolio

Jiahao Lin, Yunyang Lu () and Lulu Zhang
Additional contact information
Jiahao Lin: University of Birmingham, Business School
Yunyang Lu: The University of Sydney, Business School
Lulu Zhang: Purdue University, Science

A chapter in Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022), 2023, pp 306-315 from Springer

Abstract: Abstract In financial market investing, returns always come with risk. The theoretical research and practice of portfolio selection have yielded quite rich results. Based on Markowitz’s mean-variance theory, this paper analyses the returns and risks of stock portfolios, and uses the minimum variance and maximum utility models to find the optimal stock portfolios under different risk preferences. The research results show that in stock investment, when the correlation coefficient of two stocks is positive, the investment ratio of two stocks, one is greater than 1, and the other is less than 0. Investors can avoid risk by shorting one of the stocks in the following ways. When the correlation coefficient between two stocks is negative, the investment ratio of the least risky investment is greater than 0. This paper provides a favorable demonstration that investors can use utility-maximizing portfolio models to obtain optimal stock portfolios. The conclusion of this paper has important practical significance for investors to effectively avoid risks in the financial market.

Keywords: Minimum Model; Stock Portfolio; Utility Maximization; Comparison (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-054-1_35

Ordering information: This item can be ordered from
http://www.springer.com/9789464630541

DOI: 10.2991/978-94-6463-054-1_35

Access Statistics for this chapter

More chapters in Advances in Economics, Business and Management Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().