Stock Selection Strategy and Application of Portfolio Theory

Yaqi Wang ()
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Yaqi Wang: University of Manchester, School of Social Sciences

A chapter in Proceedings of the International Workshop on Navigating the Digital Business Frontier for Sustainable Financial Innovation (ICDEBA 2024), 2025, pp 329-335 from Springer

Abstract: Abstract There are various stock selection methods nowadays, so choosing a process most suitable for investors is essential. This paper explores three main methods of stock selection: PE Ratio, ESG criteria, and the portfolio theory. Investors can adjust their methods by investment objectives, risk tolerance, social obligations, and other indicators. By analysing the data and performances of Ping An Bank (000001. SZ), Kweichow Moutai (600519. SH), and PetroChina Company Limited (601857. SH) in the stock market, the paper mainly introduces the application of portfolio theory. Through a series of calculations of expected return, standard deviation, correlation, and applying ‘Solver-Add in’, the researcher illustrated the graph of the Efficient Frontier of the portfolio that is comprised of stocks mentioned above and obtained the optimal combination of weights of the number of stocks purchased. Overall, the research concluded that the Sharpe Ratio increases as the risk-adjusted return of an investment improves.

Keywords: investment method; stock selection; portfolio theory; Sharpe Ratio (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-652-9_33

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DOI: 10.2991/978-94-6463-652-9_33

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