Markowitz and Index Models for Optimizing Investment Portfolio Study During COVID-19 Pandemic

Abstract

Due to the spread of COVID-19 which adversely affects the global economy, the financial market experiences huge changes. To help the investors have a better understanding of the risk in the market before investing, the paper uses the data for 10 stocks from 2001 to 2021 to find out the COVID-19 pandemic's influence on the investment portfolio We construct the Markowitz and Index models under 5 constraints, and then compare the results to illustrate the optimal decisions for investing. The Markowitz model considers expected return and risk, while not attaching enough importance to risk-free assets. The Index model is brief, but the assumption it uses does not have a major influence on the results obtained. Comparing the results, it is obvious that the return and standard deviation of Index model portfolios are higher than the Markowitz model's one. Moreover, the Markowitz performs better under most of the constraints.