The Study Of Optimal Investment Proportion Of Portfolio

The main purpose of this thesis is to find optimal investment proportion of portfolio. The modern portfolio theory (MPT) and entropy theory are introduced to make decision of optimal investment proportion of portfolio. MPT provides the foundation for modern finance and investment theory, but is unable to reasonably measure investment portfolio risks, nor can it give optimal investment proportion of portfolio. However well entropy theory is used for a measure of uncertainty, it has seldom seen a wide use in investment proportion of portfolio in securities.By using entropy theory, improved Model I and Model II have been developed in this thesis and can be used for both possible returns and losses with the optimal investment proportion of portfolio to make money grow fastest determined by investors. ModelΙcan be used for consideration of a system risk which can be easily forecasted. In the case of difficult forecast of system risk, ModelⅡis employed when the normal distribution is used to represent the expected returns of investment portfolio. Furthermore, continuous-type entropy is applied to the investment portfolio with a new result which is better than that from the modern portfolio theory. Selection of an investment portfolio decision, which is made without need of the utility function and the indifferent curve, can avoid that every investor can make their own optimal investment portfolio decision. The improved models are meaningful and a case study shows that improved models can reasonably measure the portfolio risks and help investors make an optimal risk investment proportion of portfolio and get the fastest growth of the investors'capital.