The Equity Portfolio Selection at Euronext

Abstract

The European financial market has always been the dominant region of the world economy, so it is necessary to understand how to better allocate assets and find the best investment portfolio strategy. Our thesis uses the stock prices of the Euronext which through the last ten years before the outbreak of the epidemic as the basic data. The goal of our thesis is to calculate and analyze through the selected model and strategy and find out the optimal investment portfolio strategy. The main models used in our thesis are Mankowitz Model, Black's Model, Tobin Model, Naive Strategy. The tools we use to measure the performance of each strategy include Backtesting procedure and three performance measurement indicators, Maximum Drawdown, Sharpe ratio, Jensen's Alpha. After comparation, we find out that the best strategy among all strategies is the Tobin model strategy when k=10000. Because it has three best indicators, the lowest monthly standard deviation, the largest Sharpe ratio and the smallest Maximum Drawdown ratio. We hope that our thesis could provide new ideas for investors who are willing to invest in European stock markets, as well as reference strategies for stock portfolio selection.