Application of Mean-variance Model of 11 Industries in Chinese A Share Market
Year: 2024
Type: article
Abstract: The Markowitz mean-variance model is served to find a balance between stock returns and risks. Gains in the stock markets of this economic powerhouse, especially the A-share market, are remarkable. In this paper, stocks of 11 leading enterprises from 11 industries such as manufacturing, finance, energy, etc. in China's A-share market are selected. The mean-variance model contributes to calculate the weight of each stock and construct a minimum variance portfolio. By comparing the minimum variance portfolio with an equal-weighted portfolio and the market portfolio (represented by the Shanghai Composite Index), it is found that the minimum variance portfolio outperforms the market portfolio. The robustness test by removing the two largest and smallest stocks in the portfolio still holds. This study provides a feasible method to diversify the risk of the asset portfolio and improve the return and provides an important reference for related investors' portfolio construction behavior in the A-share market.
DOI: 10.54097/ag0hct57
Author: Xinyi Tong
Institution: Central University of Finance and Economics
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4401667108