Analysis of the State-of-art Portfolio Theory

DOI

10.2991/978-94-6463-408-2_44How to use a DOI?

Keywords

Portfolio theory; asset allocation; risk-return trade-off

Abstract

Portfolio theory is a fundamental concept in investment management that aims to optimize risk and return by diversifying investments across different assets. This study explores portfolio theory, including its key concepts and methodologies, such as mean-variance optimization and alternative strategies like Risk Parity and factor-based allocation. This study highlights the importance of portfolio diversification and asset allocation in achieving optimal risk-return trade-offs. The Markowitz mean-variance optimization approach provides a foundation for constructing efficient portfolios. Alternative strategies like Risk Parity and factor-based allocation offer additional perspectives for balancing risk contributions and capturing systematic risk factors. However, the limitations of these approaches, e.g., reliance on historical data and modeling assumptions, should be considered. This study provides insights into portfolio theory, empowering investors to make informed decisions when constructing investment portfolios. By understanding the principles of diversification and asset allocation, investors can effectively manage risk and optimize returns. These results contribute to the ongoing development of investment management practices, encouraging further research and innovation in portfolio construction methodologies and risk management techniques. The research’s significance lies in its practical application for individuals and institutional investors seeking to maximize their investment outcomes while effectively managing risk.

Copyright

© 2024 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Zheng Ying
PY  - 2024
DA  - 2024/05/07
TI  - Analysis of the State-of-art Portfolio Theory
BT  - Proceedings of the 9th International Conference on Financial Innovation and Economic Development (ICFIED 2024)
PB  - Atlantis Press
SP  - 387
EP  - 395
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-408-2_44
DO  - 10.2991/978-94-6463-408-2_44
ID  - Ying2024
ER  -