The Performance of Portfolio Optimization and Risk Control Strategies Based on Mean-Variance Model —A Study Under the Context of COVID-19

The study discussed the efficiency of portfolio selection methods based on the analysis of average return and standard deviation of return, from the perspective of long periods and specific time intervals. Several risk managing methods commonly utilized by the investors were discussed in the essay so as to assess their feasibility under unique economic setting. Specifically, the study applied selection strategies based on Markowitz’s Portfolio Theory, and given that people have a proclivity for higher risk aversion due to the instability brought by the pandemic, the study compared two optimization goals for constructing portfolio—the minimal variance method and the maximum Sharpe ratio method. The analytical results based on the performance of the diversified portfolio within two decades revealed that generally, the selection strategies both had better performance after the emergence of COVID-19. However, specific constraints for investment capital would affect the result more negatively during the pandemic. The findings enable us to evaluate the present practice of traditional portfolio selection strategies and provide suggestions for investors on risk managing methods choosing under the disturbance of unexpected social events.