An Empirical Study on Markowitz and Single Index Model
Junqing Wu · Advances in economics, business and management research/Advances in Economics, Business and Management Research · 2022
In this paper, the Markowitz Model and the Single-Index Model were used to study U.S. stocks.Four industries of U.S. stocks were selected to empirically analyze the data from 2002 to 2021, and the combination selection results given by the two models under five restrictions were compared.The results turned out that with all five constraints, the Sharpe ratio of the optimal portfolio provided by the Index Model, 1.432, 1.523, 1.597, 1.279, 1.333, respectively, was higher than that by the Markowitz Model,1.416,1.503, 1.540, 1.256, 1.329, respectively, which showed that although both models can give investors investment suggestions for portfolio selection, the single-index model performs better.