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

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

Authors
Jiahao Lin1, Yunyang Lu2, *, Lulu Zhang3
1Business School, University of Birmingham, Birmingham, UK
2Business School, The University of Sydney, Sydney, Australia
3Science, Purdue University, West Lafayette, USA
*Corresponding author. Email: yulu2043@uni.sydney.edu.au
Corresponding Author
Yunyang Lu
Available Online 14 December 2022.
DOI
10.2991/978-94-6463-054-1_35How to use a DOI?
Keywords
Minimum Model; Stock Portfolio; Utility Maximization; Comparison
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.

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
10.2991/978-94-6463-054-1_35
ISSN
2352-5428
DOI
10.2991/978-94-6463-054-1_35How 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  - Jiahao Lin
AU  - Yunyang Lu
AU  - Lulu Zhang
PY  - 2022
DA  - 2022/12/14
TI  - Research on the Application of Minimum Variance Model and Utility Maximization Model in Stock Market Portfolio
BT  - Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022)
PB  - Atlantis Press
SP  - 306
EP  - 315
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-054-1_35
DO  - 10.2991/978-94-6463-054-1_35
ID  - Lin2022
ER  -