Modern Portfolio Theory And Empirical Results Of Funds In China

It has been more than one hundred years since securities investment fund emergedin foreign countries, and now it has become one of three big pillars of financialinvestment business in the western developed countries. China’s capital market startedin the1980s, although the securities investment fund has made great strides and its scaleexpanded gradually after10more years of development, its market share is still low andthe assets management level has a large gap to the western developed countries becauseof its late start. As the major force of institutional investments in the capital market,securities investment funds play important roles on improving the capital marketinvestment environment, leading advanced investment ideas and regulating marketinvestment behaviors. Modern portfolio theory and method has the pivotal status inassets investment and risk dispersion, it also has great realistic meaning in thedevelopment of securities investment funds and guiding investors to make rationalinvestment. Therefore, Introducing and studying deeply the modern portfolio theory andmethods, strengthening macroeconomic fundamentals research, and developing thefinancial (derivative) tools are of great theoretical and realistic significance to promotethe development of securities investment funds, guide and consummate our countrycapital market, promote social stability and economic prosperity, and promote thesecurities market of our country to develop steady and chronically.This paper makes the following contribution:①Propose a new portfolio model based on Copula-EGarch-GPD model.Choose EGarch-GPD model to fit single sample data. At the sense of AIC, it candetermine the Copula function of joint distribution function which can best fit data. Weobtain the optimal portfolio weight according to use the optimization theory andcombine CVaR and Monte Carlo simulation method.②A new portfolio model based on expected utility maximization theory isproposed in this paper. The model can calculate the weight of optimal portfolio easilywith the Lagrange multiplier method.③Propose a new evaluation index of fund performance-Tracking ratio (for shortTR). From the definition of Sharpe ratio and information ratio, we know that Sharperatio only can evaluate the total investment ability of asset managers rather than theability of to beat the grail under different market quotation (bull or bear),and although information ratio can accurately measure the investment ability of the asset managersbeyond the market, it cannot measure the total investment ability of managers. TR wellovercomes the weakness of manager capacity evaluation of Sharpe Ratio (SR) andInformation Ratio (IR).④Introduce risk tolerance parameter to research portfolio theory. The results showthat the parameter selection range is not the whole real put forward by previous scholars,but a real interval determined by the expected return rate, variance-covariance matrix ofhistory data and grail return. Besides, the minimum requirement return determined bythe interval is also the necessary condition which determines whether portfolio iseffective.⑤Put forward a new parameter estimation method-Repeating MaximumLikelihood (for short RML). Although EML parameter estimation method can estimatethe parameters value accurately, it is very difficult in practical application. Calculationspeed of IFM method is quicker than EML, but not more effective. RML is quicker thanEML method at calculation speed, and more effective than IFM method.⑥Typical indexes in China securities market as a example are carried out inempirical analysis to models, method, and results proposed in this paper by usingdata-processing softwares Eviews and Matlab. The empirical results can match with thetheoretical derivation conclusions perfectly.