Author(s)

Li Yu, Junzhao Zhang, Wenkai Zhang

Corresponding Author

Li Yu

ABSTRACT

Portfolio optimization currently plays a key role in financial area. This paper aims to do the asset allocation analysis for several industries, i.e., retail industry, aerospace industry, new energy vehicle industry, managed healthcare industry and technology industry, etc. We choose five representative assets from these five industries and then adopt ARIMA model to forecast their compound return. These predicted data are utilized for portfolio optimization in the framework of mean-variance analysis to get the performance of the portfolio. At last, the portfolios’ performances were explained by the Fama-French three-factor model. Finally, the performance of the portfolios is accessed, including return volatility and the weight of these assets. The results show that, first, ARIMA model can be well applied to forecast the future return for financial asset; second, TSLA accounts for the largest proportions both in the minimum variance portfolio and the maximum Sharpe ration portfolio. The findings may be useful to related investors interested in the retail, aerospace, new energy vehicle, managed healthcare, and technology industries.

KEYWORDS

optimization, ARIMA, factor model, portfolio