Research On The Portfolio Investment Decision-Making Model And Empirical Analysis

Security market is the best unification between return and risk. Securities are certificate that prove the holders have rights to obtain return. Investors have to bear risks if they want to gain return. In this paper, the modern portfolio theory is expatiated. It is one of the fundamental part of financial engineering. Portfolio investment is an efficient way to reduce risk. Risk can be classified into systematic risk and nonsystematic risk, and the latter can be diversified by portfolio investment.Risk, as an uncertain phenomenon, can be described by different methods. Based on this point, the paper proposed E-V model, E-Sh model and VaR-based model. Taking variance as the risk measure, the E-V model is established. The solution and property of efficient frontier with or without short sale constraint is analyzed. Then, the E-Sh model in which risk is measured by semi-variance is proposed. VaR is a newly emergent method for risk measure. The pilot study about VaR-based portfolio model is done. Finally, 3 models are evaluated and advantages and disadvantages are pointed out.Based on E-V model, empirical analysis on sample stocks of Shanghai 30 index is made. According to the model, efficient frontier is plotted and optimum proportion is worked out. We can find that risk is reduced to the lowest level as result of investing to 9 stocks.The research is supported by scientific research program of Hebei Provincial Education Bureau (item No. 200104) and scientific innovation fund of Hebei University of Technology.