Portfolio Optimization for Retail Investor from China

Ing. Youzhen Wu

Diplomová práce

Anotace:

The main objective of this thesis is to suggest investment portfolios for a retail investor from China using portfolio optimization techniques. In building the optimal portfolio, Using Single Index Model for security selection and constructure the diversified portfolio, setting the efficient frontier by mean variance theory to set the minimum variance portfolio, building the tangency portfolio with higher expected return at a certain level of risk as optimal portfolio for retail investors. In this thesis, the Shanghai Stock Market Index is benchmark index. The reason of suggesting retail investor to make investment technique in theory of portfolio due to the affections of individual investor behaviors and limitation financial products developed in China financial market. To build the portfolio, I randomly selected the securities and calculated the holding periods return over 110 securities to find sample securities from A shares and Sci-tech innovation shares in Shanghai Stock Market. Setting four sections of diversification portfolio in accordance with different background of enterprises and price level. The consequence of study shows Single Index Model is an approximate model to form diversified portfolio and apply the mean variance theory to build the optimal portfolio which lies on the efficient frontier.

Abstract:

The main objective of this thesis is to suggest investment portfolios for a retail investor from China using portfolio optimization techniques. In building the optimal portfolio, Using Single Index Model for security selection and constructure the diversified portfolio, setting the efficient frontier by mean variance theory to set the minimum variance portfolio, building the tangency portfolio with higher expected return at a certain level of risk as optimal portfolio for retail investors. In this thesis, the Shanghai Stock Market Index is benchmark index. The reason of suggesting retail investor to make investment technique in theory of portfolio due to the affections of individual investor behaviors and limitation financial products developed in China financial market. To build the portfolio, I randomly selected the securities and calculated the holding periods return over 110 securities to find sample securities from A shares and Sci-tech innovation shares in Shanghai Stock Market. Setting four sections of diversification portfolio in accordance with different background of enterprises and price level. The consequence of study shows Single Index Model is an approximate model to form diversified portfolio and apply the mean variance theory to build the optimal portfolio which lies on the efficient frontier.

Keywords

Expected return, Optimal Portfolio, Single Index Model, Inefficient Market, Beta, Risk, Retail Investor

Jazyk práce: angličtina

Datum vytvoření / odevzdání či podání práce: 13. 5. 2022

Obhajoba závěrečné práce

• Obhajoba proběhla 1. 9. 2022
• Vedoucí: Ing. Tomáš Plíhal, Ph.D.
• Oponent: Ing. Dagmar Vágnerová Linnertová, Ph.D.

Masarykova univerzita

Ekonomicko-správní fakulta

Magisterský studijní program / obor:
Finance / Finance