Portfolio construction by using Markowitz Model and Index Model during pandemic of COVID-19

Abstract

During the epidemic, many industries have been hit to varying degrees, social productivity has sharply decreased, and economic development has stagnated or even regressed. It is estimated that global GDP declined by 4.3% in 2020 due to the impact of the pandemic. The same thing happened in the stock market, where the epidemic increased the vulnerability of it, causing stock prices to fluctuate greatly and investors to suffer losses. Recently a bunch of studies have focused on how to make successful investments by modeling and data analysis under the difficult circumstances. This paper will continue to use the MM model and the IM model to construct optimal portfolios under different constraints in order to simulate various situations and provide the investors with advice of all aspects.10 different companies in 3-4 staple fields will be randomly selected as target in this paper as the main factors of MM model and IM model in order to prove the wide compatibility of the two models in the real stock market.In addition, this paper will use both the minimum risk calculation method and the maximum efficiency calculation method as the criterion to measure a portfolio’s performance with the purpose of presenting the investors two different standpoints to view their portfolios.