Optimization effects in the new energy, medical and home appliance industries of China’s A-Share Market

Wanyi Xia

doi:10.54691/bcpbm.v24i.1456

Authors

Wanyi Xia

DOI:

https://doi.org/10.54691/bcpbm.v24i.1456

Keywords:

Optimization effects, Portfolio selection, Mean-variance model, Sharpe ratio.

Abstract

Portfolio construction is increasingly prevalent in the business field and is becoming a popular concern in scientific research today. This study compares optimization effects in the renewable energy, pharmaceutical and home appliance industries of China’s A-Share Market. Mean-variance model and Sharpe ratio are implemented to ensure the expected returns and to reduce risks for portfolios at the same time. Under the assumption that there is no limitation on the short selling, it is found that market portfolio can produce higher risk-adjusted returns than the benchmark stocks in each industry. Furthermore, the optimization effects in the pharmaceutical industry were more significant than those in the renewable energy industry but less considerable than those in the household appliance industries. The main reason may be that the diversification and leverage effects perform differently in different industries. In addition, the methodologies and findings of the paper can help investors understand the optimization benefits more deeply and guide their construction of the market portfolios.

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