| In the area of portfolio investment,the risk is a double-edged sword. Investors not only want to use the risk to obtain benefits, but also they are worried about the possibility of the great risk of loss, which is faced by investors in general ambivalence. In order to obtain stable income, investors use the investment portfolio to diversify risk, the theory of risk diversification was originally put forward by Harry M. Markowitz. The concept of the variance was first introduced by Markowitz into the portfolio risk measurement models. The full variance of stock was used to measure the risk of volatility, the above of the target rate of and the below of the target rate were all included in the model. This method is questioned by many scholars. But the semi-variance method calculate the variance only include the below of the target rate which is much better than the full-variance and is much in line with the practical and psychological needs of investors.This paper summarizes the research and digests the previous measure of portfolio risk, it bases on the theory of the full-variance and the semi-variance, and use the standard of expected utility maximization and the standard of stochastic dominance rule to analyze the full-variance and the semi-variance comprehensively. The mature development of the semi-variance theory is the LPM theory,in this paper the LPM theory was analyzed deeply, included the LPM applied to the portfolio risk diversification principle and lower partial moment portfolio to determine the optimal investment proportion.In the empirical part of the paper, selected energy, finance, materials, growth, value, industrial, consumer, medical, information, public comparison of the ten sections of representative stocks. The optimal portfolios of the 10 stocks were determined by the full-variance and the LPM models, and the application of the two-models was carefully compared. This outcome will be very usefully in the real portfolio selection and asset configuration. |
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