Cluster and MTV Approach for Making Index Portfolio
Feng Ye · Industrial Engineering and Engineering Management · 2001
In the CAPM theory,we know that any rational investor will take the market portfolio as his optimum risk protfolio when he optimizes his investments. Many researches also tell us that the passive strategy is effective. People who simply invest the market index will do as good as those taking in trouble with the information or technological analysis. However,the great number of the securities in the real market makes it impossible to invest on the synthetic index with any limited capital. So a pragmatic method using both cluster analysis and MTV model is introduced in this paper to select an index protfolio. This method allows us using only a few of stocks to make a portfolio which performance is in accordance with the selected index. Moreover,with the help of SAS and Excel,the authors make such a protfolio with 10 stocks chosen from 50 arbitrarily selected stocks in the Shanghai Stock Exchange Market,such a portfolio is also good in forecasting.