Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)

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Industry Diversification and Optimal Industry Combination of Portfolios

Authors
Mingyu Lyu1, †, Xiaolong Qiu2, *, †, Zijian Liu3, †, Xu Yang4, †
1School of social science University of California Irvine Irvine, California, 92697
2School of social science University of California Irvine Irvine, California, 92697
3College of Computer science Sichuan University Chengdu, China
4Electrical Engineering & Information Technology Shandong University of Science and Technology Qingdao, China

There authors contributed equally

Corresponding Author
Xiaolong Qiu
Available Online 26 March 2022.
DOI
10.2991/aebmr.k.220307.196How to use a DOI?
Keywords
industry diversification; minimum variance portfolio; industry combination; maximum Sharpe ratio portfolio; maximum drawdown portfolio
Abstract

The importance of asset diversification has been tested and proven many times in the past few decades. Investors can allocate their money into different asset classifications, such as stocks, golds, and funds. Undoubtedly, returns and risks vary across different types of assets. A huge number of risk lovers are keen to invest in stocks and equity funds due to their fascinating revenues. However, the equity market covers a wide variety of industries. How could one reasonably allocate assets to obtain a fair gain with low risks? We aimed at figure out the optimal combination of 20 industries that construct minimum variance, maximum Sharpe ratio, and maximum drawdown portfolios separately among 64 industries in China. Basically, we gathered industries index data in 2014 and 2015 and utilized Excel functions to do our experiment. Eventually, 7 industries showed up in both years’ minimum variance portfolios. If certain industries appeared in minimum variance portfolios over and over again, these industries usually had relatively low risks and could offer suggestions for investors. Some implications could also be found from maximum Sharpe ratio and maximum drawdown experiments.

Copyright
© 2022 The Authors. Published by Atlantis Press International B.V.
Open Access
This is an open access article under the CC BY-NC license.

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Volume Title
Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)
Series
Advances in Economics, Business and Management Research
Publication Date
26 March 2022
ISBN
978-94-6239-554-1
ISSN
2352-5428
DOI
10.2991/aebmr.k.220307.196How to use a DOI?
Copyright
© 2022 The Authors. Published by Atlantis Press International B.V.
Open Access
This is an open access article under the CC BY-NC license.

Cite this article

risenwbib
TY  - CONF
AU  - Mingyu Lyu
AU  - Xiaolong Qiu
AU  - Zijian Liu
AU  - Xu Yang
PY  - 2022
DA  - 2022/03/26
TI  - Industry Diversification and Optimal Industry Combination of Portfolios
BT  - Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)
PB  - Atlantis Press
SP  - 1183
EP  - 1191
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.220307.196
DO  - 10.2991/aebmr.k.220307.196
ID  - Lyu2022
ER  -