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Optimizing Returns of Diversified Investment Portfolio with Markowitz Model

In: Proceedings of the 2023 2nd International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2023)

Author

Listed:
  • Ge Bu

    (Macau University of Science and Technology)

  • Yuming Liu

    (Southwest University)

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.

Suggested Citation

  • Ge Bu & Yuming Liu, 2024. "Optimizing Returns of Diversified Investment Portfolio with Markowitz Model," Advances in Economics, Business and Management Research, in: Faruk Balli & Hui Nee Au Yong & Sikandar Ali Qalati & Ziqiang Zeng (ed.), Proceedings of the 2023 2nd International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2023), pages 123-135, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-268-2_16
    DOI: 10.2991/978-94-6463-268-2_16
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