The Construction of Investment Portfolios under the Minimization of VarianceTaking the Hong Kong Insurance Market as an Example

Abstract: In the context of a decline in the Hang Sheng Index, this paper intended to study the different effect between using Markowitz Model and Index Model to invest insurance industrys stock in Hongkong, especially for those who are risk-averse. A recent ten years of adj close for 9 typical insurance stocks from Hongkong as well as the Heng sheng index has been chosen as the target data. The result illustrates that there is no significant difference between these two models. This study intends to give some reference for those who focus on Hong Kong insurance industrys investment and hate taking risk. This study find that the constraints minimal variance is the smallest at 16.832(The index model of constraint 2) and the constraints highest sharp ratio is around 0.26(The index model of constraint 4). The findings of this paper provide the investors empirical evidence on how to construct optimal investment portfolio in Hong Kong insurance market.