MLA 8 Zhou, Xiaoting. "CAPM MODEL ANDMODERNPORTFOLIOTHEORY." Int. j. of Social Science and Economic Research, vol. 6, no. 5, May 2021, pp. 1410-1429, doi.org/10.46609/IJSSER.2021.v06i05.003. Accessed May 2021.
APA 6 Zhou, X. (2021, May). CAPM MODEL ANDMODERNPORTFOLIOTHEORY. Int. j. of Social Science and Economic Research, 6(5), 1410-1429. Retrieved from doi.org/10.46609/IJSSER.2021.v06i05.003 Chicago Zhou, Xiaoting. "CAPM MODEL ANDMODERNPORTFOLIOTHEORY." Int. j. of Social Science and Economic Research 6, no. 5 (May 2021), 1410-1429. Accessed May, 2021. doi.org/10.46609/IJSSER.2021.v06i05.003.
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Abstract: Mean-Variance Model (Modern portfolio theory) maybe the most famous model in financial
field. It assesses a portfolio which’s the expected return (mean) is maximized under a given risk
(variance). It comes from assumption that investor want as high as return while as low as risk as
he could when he invested a couple of assets (a portfolio isthe collection of many assets). This
model could give us the many optimal portfolio (efficient portfolio frontier) when we know
every asset’s expect return and their covariance matrix. The accuracy estimating the covariance
matrix is the most essential part implementing portfolio optimization.
Thus in this project, we will perform the mean variance portfolio of the targeted portfolio with
Ledoit-Wolf shrinkage methodology which can give us robust estimation of covariance matrix.
Then we will use the optimal portfolio to visualize the efficient frontier and compare the optimal
portfolio with index or other randomly chosen portfolio.
The International Journal of Social Science and Economic Research Inviting Papers/Articles for Upcoming Issue Volume 9 No. 11 November 2024.
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