Proceedings of the 2024 2nd International Conference on Management Innovation and Economy Development (MIED 2024)

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Using Portfolio Theory to Balance Risk and Return

Authors
Qi Wan1, *
1Nanhu Campus, Wuhan University of Technology, Wuhan, Hubei, China
*Corresponding author. Email: 338297@whut.edu.com
Corresponding Author
Qi Wan
Available Online 15 October 2024.
DOI
10.2991/978-94-6463-542-3_59How to use a DOI?
Keywords
portfolio theory; investment decision-making; risk; return; diversification
Abstract

Investors prefer investing in different financial products in the capital market to earn higher returns—however, various financial products are changing constantly. Investors without relative information and tools can easily suffer some losses that can be easily avoided. So, the paper aims to provide a way for some investors to hedge risk and avoid nonsystematic risks. Based on Markowitz’s portfolio theory, the paper will use the mean-variance model to show how to construct an optimal portfolio and check the portfolio by using the Sharp ratio. Baidu, Walmart, and Tesla stocks were selected as examples because these stocks have a negative correlation. Then, the paper will discuss how to decide each weight of stock by analyzing the past return of each stock and making an efficient portfolio. Lastly, the portfolio shows excellent results, showing the specific meaning of portfolio theory. It has a significant reference and practical application for investors to make better decisions when they choose financial assets in the capital market.

Copyright
© 2024 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 2024 2nd International Conference on Management Innovation and Economy Development (MIED 2024)
Series
Advances in Economics, Business and Management Research
Publication Date
15 October 2024
ISBN
978-94-6463-542-3
ISSN
2352-5428
DOI
10.2991/978-94-6463-542-3_59How to use a DOI?
Copyright
© 2024 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  - Qi Wan
PY  - 2024
DA  - 2024/10/15
TI  - Using Portfolio Theory to Balance Risk and Return
BT  - Proceedings of the 2024 2nd International Conference on Management Innovation and Economy Development (MIED 2024)
PB  - Atlantis Press
SP  - 509
EP  - 515
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-542-3_59
DO  - 10.2991/978-94-6463-542-3_59
ID  - Wan2024
ER  -