Constructing Portfolios Based on Different Weight Schemes

Abstract

The growing concerns for environmental problems, as well as the recent confrontation between Russia and Ukraine, pushes people to the exploring and development of alternative resources other than conventional fuel, oil, and coal. The renewable resource market is in its great time. Therefore, finding an efficient way to build portfolios for its stocks becomes worth investigating. The paper collects 5 stock’s daily pricing data for a two-year period to build portfolios based different portfolio weight schemes. With the different combinations of weighting, a subsequent period of time is also used to test if the result from previous two-year period persists. As the result, because of the recent fluctuation in the stock market, the portfolio based on the previous two-year period doesn’t seem to fit the current market. The result demonstrates the fluctuation experienced by renewable resource industry and the high risk of investing in recent stock market. It also proves the importance of consistently incorporating updated data when constructing portfolios.