Modern Financial Portfolio Theory And The Empirical Analysis Of China's Securities Market

This paper bases on the evolution and development of the financial investment portfolio theory from the traditional to the modern, expounds application and the problems of the theory, analyses empirically the single index model and the Capital Asset Pricing Model in the application in China's securities market, Conducts a series of discussions on how to improve the utilizing of the Modern Portfolio Theory in the China's securities market.First this paper describes the traditional portfolio theory and its limitations, and the emergence and development of the modern financial portfolio theory. Chapter 2 introduces the hypotheses of the modern financial portfolio theory, in particular the Efficient Market Hypothesis, and the arguments on the Market Efficiency, and discusses the efficiency of China's stock market in order to judge the application situation of Modern Portfolio Theory in China's stock market.The third chapter describes the narrow Modern Portfolio Theory, discusses the risk assessment method and the models of Modern Portfolio Theory, including the Markowitz mean-variance model, the mean-variance model and the mean-semi variance model, as well as they are compared and evaluated on the efficiency of the application. This paper puts forward an improved model on the Lower Partial Moments, puts forward a method giving the formula which measures the risk different moment on the basis of different loss values.Chapter IV first introduces the Capital Asset Pricing Model, reviews the empirical study of the domestic and foreign scholars on the Capital Asset Pricing Model, in view of the problems of data timeliness, the validity of the market index being selected of the domestic empirical study, we chose the weekly interest rate data from 2001 to 2006 of the 60 stocks of the Shanghai A-share stock market for the CAPM Positive Test. The results show that there is not linear relationship expected by CAPM in the gains and systemic risk of Shanghai stock market.The Capital Asset Pricing Model is a thesis on the expected profit, but in fact, anyone can have direct observation of the realized gains, in order to let expected profit become realized gains, we can use single-index model. Chapter 5 presents the single-index model, the multi-factor model and the application of single index model, discusses the selection of different stock with the rise and fall of the stock market, then conducts some correlation analysis on the China's stock market to examine at this stage whether or not the single-index model can describe the related structures of these stocks receipt.Chapter VI discusses the application and the problems of Modern Portfolio Theory, and put forward some solutions,finally draws a conclusion on the applicability of the theory in China's capital market, makes a prospect on the application of the theory in our country.