Portfolio Construction in China’s Stock Market: Take Automobile Industry as Example

Qinyan Xie

doi:10.54691/bcpbm.v30i.2449

Authors

Qinyan Xie

DOI:

https://doi.org/10.54691/bcpbm.v30i.2449

Keywords:

portfolio construction; automobile industry; ARMA model; mean-variance model.

Abstract

With the development of new energy vehicles, investors focus on the automobile subsidy in rural areas, and automobile section of China’s A share has been active recently. Based on ARMA model and Mean-Variance model, this paper hopes to give advice on portfolio construction. All the closing price of the stocks are download from AkShare database, from the 9^th June, 2020 to the 9^th June, 2022. After the stationary test and correlation test for time series, make predictions about return rates for the following 20 days based on ARMA model, construct a profitable portfolio based on Mean-Variance model, compare the accumulative returns and Sharp ratios of constructed portfolio and the one with equal weights. The result reveals that the constructed portfolio outperforms the latter portfolio obviously, so it can be considered that the construction is reasonable. This paper follows the current affairs about the policies on car subsidy in rural areas, uses statistical methods to provide suggestions of wealth allocation for investors, expands the application of the two models.

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