Analysis on Portfolio Selection under Markowitz Model and Index Model before and After Covid-19 Outbroke

Abstract

The worldwide outbreak of COVID-19 in early 2020 has brought great challenges to global economic development. Against this background, how to choose a better portfolio to invest in becomes a problem. The purpose of the study is to find the effect of COVID-19 on different type of portfolios under one benchmark and four constraints by utilizing Markowitz model and Index model. This paper selects one stock index and six stocks from three different industries to form a portfolio. Portfolio which only consider risks and portfolio which consider both risks and returns under the Markowitz model and the index model with different constraints are presented respectively. The empirical results show that the portfolios that performed best before COVID-19 were difficult to choose. However, statistics after COVID-19 shares similarity. In general, the portfolio when the weight of SPX is zero shows the best performance in the Markowitz model, and the portfolio when the sum of the absolute values of all weights is less than or equal to two shows the best performance in the index model. This paper also contributes to provide a guideline to conduct investors to choose better investment portfolios by different models after COVID-19.