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

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Balance Risk and Return: Application of Markowitz Portfolio Theory in the Investment Field

Authors
Yuanfan Shi1, *
1School of Management and Economics, The Chinese University of Hong Kong - Shenzhen, Shenzhen, China
*Corresponding author. Email: 122020155@link.cuhk.edu.cn
Corresponding Author
Yuanfan Shi
Available Online 15 October 2024.
DOI
10.2991/978-94-6463-542-3_57How to use a DOI?
Keywords
Markowitz Portfolio Theory; risk-return balance; portfolio optimization
Abstract

The capital market has become more active but complex in recent years. Many risk-averse investors find it urgent to find a way to obtain relatively higher returns while suffering the same level of risk. This paper introduces Markowitz’s Portfolio Theory, which cares about expected returns and standard deviation of risky assets, as a creditable approach to solving this problem. This paper will first explain the benefit of diversification implied by this theory. Then, it will take gold, the stock of Ford Motor and Manning&Napier High Yield Bond Series(MNHAX) as sample risky assets of commodity, equity and bond, respectively, to form a portfolio that captures the most common investment products. Next, this portfolio will be optimised through Lagrangian based on maximising the Sharpe ratio, which will be conducted by Python, to be seen as an application of the theory in the investment field. The result shows the highest Sharpe ratio and the weight of each asset. This paper is expected to remind investors of the importance of diversification and provide a proper method of balancing risk and return and comparing different assets to improve their portfolio.

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_57How 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  - Yuanfan Shi
PY  - 2024
DA  - 2024/10/15
TI  - Balance Risk and Return: Application of Markowitz Portfolio Theory in the Investment Field
BT  - Proceedings of the 2024 2nd International Conference on Management Innovation and Economy Development (MIED 2024)
PB  - Atlantis Press
SP  - 492
EP  - 500
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-542-3_57
DO  - 10.2991/978-94-6463-542-3_57
ID  - Shi2024
ER  -