IDEAS home Printed from https://ideas.repec.org/h/spr/advbcp/978-94-6463-054-1_35.html

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

In: Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022)

Author

Listed:
  • Jiahao Lin

    (University of Birmingham, Business School)

  • Yunyang Lu

    (The University of Sydney, Business School)

  • Lulu Zhang

    (Purdue University, Science)

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.

Suggested Citation

  • Jiahao Lin & Yunyang Lu & Lulu Zhang, 2023. "Research on the Application of Minimum Variance Model and Utility Maximization Model in Stock Market Portfolio," Advances in Economics, Business and Management Research, in: Vilas Gaikar & Min Hou & Sikandar Ali Qalati (ed.), Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022), pages 306-315, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-054-1_35
    DOI: 10.2991/978-94-6463-054-1_35
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:advbcp:978-94-6463-054-1_35. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.