Optimal Investment Portfolio under Different Models with Various Constraints Especially Considers COVID-19 Period

Abstract

The outbreak of COVID-19 at the end of 2019 had a severe impact on global economic markets, with the U.S. stock market experiencing four circuit breakers in one month. As of July 2021, the real GDP of the United States has significantly outpaced the growth rate of the world's advanced economies. In order to study how investors invest in the stock market after the U.S. stock market experience circuit breaker, this paper selects six stocks as the research object using the monthly closing prices from May, 2001 to May, 2021 as sample data, and calculates the optimal portfolio by Markowitz model and Index model. Through calculation and constraint of different conditions, we obtain the variance and Sharpe ratio of the six selected sample stocks under the two conditions of minimum variance portfolio and maximum Sharpe ratio portfolio respectively. In the portfolio based on Markowitz model and Index model, we can draw a conclusion that Procter & Gamble Co. accounts for a larger proportion under different constraints. Different constraints will also lead to different results. In most cases, a board index is included, and the optimization constraints brought by it can make the portfolio return under Markowitz model and Index model reach the maximum. If the constraints of FINRA regulation T are taken into account, the Sharpe ratio values can be higher.