Impact of the Outbreak on U.S. Equity Portfolios Based on Markowitz and Index Models

Abstract

The epidemic occurred in 2019 made a great difference in the global financial markets. To explore the impact on stock market, this paper builds special portfolios under four specific constraints by using Markowitz and index model. This paper selected the stock prices of 11 stocks in different industries for 20 years and then focused on two vital indicators to analysis the change of risk and return. One is minimum variance, and the other is maximum sharp ratio. The results show that there was an increase in both minimal variance and maximum sharp ratio during this special period. Comparing with the data before, this paper argues that the outbreak has caused financial volatility and accelerated the shift in the consumer side of the equation. The fluctuation of stock price can give rise to significant speculative activity and the increase in speculative activity has led to an increase in risk and a simultaneous increase in return. This paper also found that the degree of restriction under four constraints is almost not change. The results from this paper facilitate the study of epidemic’s impact on other stock and help people to build a reasonable portfolio when investing.