Advances in Economics, Management and Political Sciences
- The Open Access Proceedings Series for Conferences
Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
Series Vol. 63 , 28 December 2023
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Access | Article
Comparative Analysis and Research of Investment Portfolio Management Models
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Abstract
Portfolio management plays a significant role in the world of finance and investing, offering benefits and contributions to both individual investors and institutions. Researchers use many mathematical models to make informed decisions about how to allocate and manage investments within a portfolio to optimize risk versus return trade-off based on the investor’s preference and constraints. This paper primarily employs the literature review methodology and comparative analysis methodology. Firstly, it collects, summarizes, and analyzes multiple papers on portfolio management models, including Markowiz Mean-Variance Model, Capital Market Line (CML), Arbitrage Pricing Theory (APT) and Capital Asset Pricing Model (CAPM) with the origin of the models, their key assumptions, components, and applications. Additionally, this paper also utilizes comparative analysis by comparing the similarities, differences, and respective downsides and benefits of the four main research models. Through this comparison, the paper investigates the relationships and application distinctions among the models. As a result, these models evolve and refine over time, with some building on others. CAPM extends the Markowitz Model by introducing the risk-free rate and market portfolio as benchmarks, simplifying the risk-return relationship, and introducing systematic risk. The Capital Market Line (CML), derived from CAPM, illustrates efficient portfolios made up of both market and risk-free assets and shows the risk-return trade-off. APT, a later model, can be seen as an extension of CAPM.
Keywords
Portfolio Management, Markowiz Mean-Variance Model, CML, CAPM, APT
References
1. Kai-Chun Chiu, Lei Xu, Arbitrage pricing theory-based Gaussian temporal factor analysis for adaptive portfolio management, Decision Support Systems, Volume 37, Issue 4, 2004, Pages 485-500, SSN 0167-9236, https://doi.org/10.1016/S0167-9236(03)00082-4.
2. Michael Zabarankin, Konstantin Pavlikov, Stan Uryasev, Capital Asset Pricing Model (CAPM) with drawdown measure, European Journal of Operational Research, Volume 234, Issue 2, 2014, Pages 508-517, ISSN 0377-2217, https://doi.org/10.1016/j.ejor.2013.03.024.
3. Salvador Cruz Rambaud, José Garcı́a Pérez, Miguel Angel Sánchez Granero, Juan Evangelista Trinidad Segovia, Theory of portfolios: New considerations on classic models and the Capital Market Line, European Journal of Operational Research, Volume 163, Issue 1, 2005, Pages 276-283, ISSN 0377-2217, https://doi.org/10.1016/j.ejor.2004.01.016.
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Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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- Volume Title
- Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
- ISBN (Print)
- 978-1-83558-227-5
- ISBN (Online)
- 978-1-83558-228-2
- Published Date
- 28 December 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/63/20231386
- Copyright
- 28 December 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited