Author(s)

Zirui Deng, Xiaoqi Li, Ziyang Li

Corresponding Author

Ziyang Li

ABSTRACT

Calculating the portfolios in both Markowitz and single-index models are significant in investing market. Nevertheless, such literature has not been applied successfully in the real life. Two models are established by solving and graphing the minimum variances frontier, efficient frontier, maximum return frontier, max Sharpe ratio, minimum variances, as well as the CAL. The empirical results indicating that the Markowitz model is much more accurate and precise than the index model since the Markowitz model considers more factors than the index model. However, the index model also has its advantage: the index model can help people get the estimated data that is similar to the Markowitz model in a short time, and the index model is accurate enough for investors to use. Two models are established to help investors get the optimal portfolios and several options according to investors’ level of risk-aversion in different conditions. This paper provides a better understanding of two models in both concept and calculation parts.

KEYWORDS

Markowitz model, Index model, Minimum variances, maximum Sharpe ratio