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

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Forecasts on Best Investment Portfolio for Healthcare Companies Based on ARIMA and GARCH Models

Authors
He Gong1, *, Rei Hong2, Zhuoran Li3
1Faculty of Arts and Science, University of Toronto, Toronto, ON, M5S 1A1, Canada
2School of Business Administration, Guangdong University of Finance and Economics, Guangzhou, 510320, Guangdong, China
3School of Physical Sciences and Social Science, University of California, San Diego, CA, 92093, USA
*Corresponding author. Email: helen.gong@mail.utoronto.ca
Corresponding Author
He Gong
Available Online 14 December 2022.
DOI
10.2991/978-94-6463-054-1_44How to use a DOI?
Keywords
ARIMA model; GARCH model; Portfolio optimization; Time series; Healthcare
Abstract

Healthcare stocks have increased due to the testing and treatment costs and many other factors caused by the COVID-19 pandemic since 2020. This paper constructs portfolios to minimize the risk and maximize the returns of healthcare stocks. Moreover, to enhance the performance of the initial portfolio, this paper uses time series analysis to forecast the stock price and verify the forecasting outcomes. The paper investigates the stock price of top healthcare companies in the United States using time series analysis to predict their performance and organize an optimal portfolio. Specifically, this research paper first employs the Auto Regressive Integrated Moving Average (ARIMA) and Auto Regressive Conditional Heteroskedasticity (ARCH) models to determine the 30 days stock price forecasting. After that, according to the historical data and forecasts, it evaluates the portfolio's efficient frontier based on Monte Carlo simulations (MCOS), which determines the minimum volatility, maximum Sharpe ratio, and the most suitable portfolio. The results show that the return of the optimal portfolio performs a more significant expected return and has less volatility than the portfolio with equal weights, which proves the validity of our model.

Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022)
Series
Advances in Economics, Business and Management Research
Publication Date
14 December 2022
ISBN
978-94-6463-054-1
ISSN
2352-5428
DOI
10.2991/978-94-6463-054-1_44How to use a DOI?
Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - He Gong
AU  - Rei Hong
AU  - Zhuoran Li
PY  - 2022
DA  - 2022/12/14
TI  - Forecasts on Best Investment Portfolio for Healthcare Companies Based on ARIMA and GARCH Models
BT  - Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022)
PB  - Atlantis Press
SP  - 399
EP  - 414
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-054-1_44
DO  - 10.2991/978-94-6463-054-1_44
ID  - Gong2022
ER  -