The origination and progress of modern portfolio theory

Yifei Chen; Junjian Lu

doi:10.54691/bcpbm.v20i.1097

Authors

Yifei Chen
Junjian Lu

DOI:

https://doi.org/10.54691/bcpbm.v20i.1097

Keywords:

CAPM; APT; Python; security; asset; factor.

Abstract

Portfolio construction plays a vital role in investment decision. In this paper, we demonstrate the origination and progress of the modern asset portfolio theory as well as the state-of-art applications. Specifically, we discuss the measure to optimal portfolio configuration and apply Python to analyzing portfolio configuration. According to the analysis based on Markowitz portfolio theory, one can obtain the portfolio with the smallest risk or the largest Sharpe ratio and the efficient boundary among the portfolio composed of multiple assets. Investors can make rational investment according to their actual ability and risk preference. Overall, these results shed light on the combining traditional financial theory with emerging programming language to address financial issues more quickly and efficiently.

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