Portfolio Optimization for Several Industries among the U.S. Stock Market
DOI:
https://doi.org/10.54691/bcpbm.v38i.3927Keywords:
Capital market, factor model, portfolio optimization.Abstract
Optimizing portfolio has been a popular topic since it was proposed because it can reduce the investment risk. This study selected five active stocks from different industries, including Online E-Commerce, Commercial Banks, Motor Vehicles, Mobile Communication Production, and Telecommunications. Then they were allocated into five kinds of portfolios, which are tangency portfolios and minimum variance portfolios under Capital Asset Pricing Model and Fama-French three-factor Model, as well as the 1/N portfolio. The results found that ‘BAC’ and ‘T’ have the largest weight and the lowest weight respectively in the two models. The comparison of the five portfolios showed that the portfolio with the highest cumulative return is the tangency portfolio under FF3F Model, and the 1/N portfolio also performed well. Only these two portfolios outperformed the SPDR S&P 500EFT Trust. This research may help investors focused on the five sectors mentioned above to have a better idea of how to allocate their capital.
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