CAPM Model and Optimal Risky Portfolio for American Stock Market

Abstract

Runsheng Rong and Fu Haifeng

The stock market has high risks. The purpose of this project is to calculate the beta coefficients and build the optimal risky portfolio consisting of eight different stocks each representing different significant industries (which includes information technology, electric cars etc.) to diversify risk and gain a high return. Putting more stocks into the portfolio can help analysts carry out comprehensive analysis on different situations, periods, and types of investment portfolio, so as to disperse risks and obtain high returns, also, ensure the diversity of portfolio and a lower risk. The empirical results in this paper shows that by allocating their money appropriately in different stocks, investors can gain returns multiple times higher than putting all of them in merely one single stock, which proves the validity of this paper.

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