Theoretical And Empirical Analysis Of The Efficient Markets And Portfolio Management

The management of securities portfolio mainly includes forecasting of return and risk from securities, portfolio optimization and portfolio performance measurement. The paper study the efficiency of market, estimation of security, the model of continuous-time portfolio optimization, and the modifying of portfolio taking accound of transaction cost.The analytical aim of this paper is the world stock market. We study the optimization of portfolio with mathematics and statistics method. Firstly, we test whether the stock price have the form of geometric Brownian motion ; then, we model the optimal portfolio taking accound of transaction cost in mathematics so that the continuous-time portfolio optimization can be used to stock investment really. We calculate the return of optimal portfolio with transaction cost systematicly.The structure of the paper includes: Chapter 1, we review EMT and test of it. We test the EMT from the stock price having the form of a geometric Brownian motion. Chapter 2, we rewiew some valid mathods of stock evaluation, and study how to combinate these evaluation methods . Chapter 3, we review the development of portfolio management theory. Chapter 4, we analyze continuous-time portfolio optimization, and test the conclusion. Chapter 5, we study the modifying of portfolio taking accound of transaction cost.The conclusions and mam innovations are as follows:1.Modern financial theory usually assume that the stock price have the form of geometric Brownian motion, and conclude the optimal portfolio without transaction cost. However, no people take systematic empirical test. We test this assumation systematicly, and we draw the conclusion that the probability of the stock price having the form of geometric Brownian motion is obviously with the decline of samples.2. Stock price having the form of geometric Brownian motion means EMT in fact, and testing whether the stock price having the form of geometric Brownian motion means Testing EMT. Ours test display the stock market usually is weak efficient, but it have no efficiency sometimes.3.We test continuous-time portfolio optimization systematicly, we draw theconclusion that continuous-time portfolio optimization is very valid.4.The stock price change every time, so we should chang our portfolio every time according to optimization conclusion. But we should have transaction cost in fact every time, so transaction cost limit the continuous-time portfolio optimization. We conclude the model of portfolio optimization with transaction cost, and succeed.