The Empirical Study About The Possibility To Exercise The Modern Portfolio Theory Based On The Index Model On Shanghai Stock Market

The modern portfolio theory is the core research area of finance. What it mainly researchs is that investor choose all kinds stock from combination according to the demand, then optimize these combination for realize investment goal. The reason of the investor optimizing portfolio is reduce Not-system risk. Investor can find a balance dot between invest-return and invest-risk via optimize Portfolio, namely realize the maximization of the invest-return on the premise of taking on a certain amount of risk, or minimize the invest-risk on the premise of the fixed return. Based on the achievement which scholars who have inherited the idea of portfolio optimize have gained through researching the modern portfolio theory, this paper analyzes the possibility to exercise the modern portfolio theory on Shanghai stock market by using empirical study.At first, this paper look backward about the history of portfolio, introduce means-variance theory, single-index model, multi-index model, and indicate that it was a method of mathematical programming which minimum the risk and subject to a given level of expected return and the sum of the capital. Besides, the author makes a general evaluation of the models. Based on the theoretical analysis, this paper then use empirical methods to study the relation between the portfolio risk and portfolio scale, which let me know the potentiality to exercise the modern portfolio theory, and the rational portfolio scale is between 9 and 10 stocks. Then this paper uses the approach of means- variance model, single-index model and FF three-factor model, where short sales are disallow, subject to the sum of total capital and the expected return, minimum the variance, and get the efficient frontier of three models which are used to contrast and analyze.From the research result, we draw the conclusion that the portfolio effect using single-index model is the best. When we establish a efficient multi-index model in portfolio management, what we should mainly consider is whether the factor can reflect the correlation between different stocks.