Portfolio Optimization for Major Industries in American Capital Market

This study focuses on portfolio optimization of five companies in the American capital market using the mean variance model. The importance of portfolio construction is emphasized, considering its significance in mitigating risk and maximizing returns for investors. Historical financial data and market information of five selected companies from 2013 to 2023 are analyzed. In this work, 10,000 investment portfolios are simulated using Monte Carlo simulation. The portfolio with the highest Sharpe ratio and the portfolio with the lowest volatility are then determined using the mean variance model. The performance of these two portfolios is assessed by comparing them to real income data covering nearly two months after the asset weights for these two portfolios have been determined. The result of this study shows that Apple processes the largest proportion of the maximum Sharpe ratio portfolio, while Google for the minimum volatility portfolio. By comparing the cumulative return of the two portfolios with the NASDAQ 100 Index, it is discovered that both portfolios outperformed the benchmark index. The insights gained from this research offer valuable guidance to investors, enabling them to make informed decisions in constructing optimal portfolios that align with their risk and return preferences.