Research Of Entropy In Portfolio Risk Analysis

With the continuous development of financial markets, the problems of risk become more and more complex for investors. The risk of uncertainty leads to the volatility in future earning. And also the volatility of assets and investors now need to address in this issue and how to evaluate the risk properly is the question which the investors should be settled currently, so the risk will play an inestmable role in the financial markets.This paper based on the risks of inherent in-depth analysis in securities market, the portfolio decision-making, the use of information entropy theory and methods etc to re-define the degree of portfolio risk which under the conditions of the joint information to further define the degree of portfolio risk, for establishing a better portfolio risk model which really suits for the actual situation of China's securities market, completely taking the factors such as transaction costs, capital constraints, the minimum trading unit and to limit short sales etc into account. This model is mainly for the level of risks given different values and the optimal portfolio allocation programs, as well as the corresponding gain great value, and then it will determined the efficient frontier of the portfolio optimization model. Above all, the model is a real set of effective portfolio and the real stock market and it is even closer and more practical for the real situation of China's securities market.