Optimizing Risk-Return Portfolios: A Case Study of Healthcare Companies in Mainland China
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Yiyang Liu
College:
College of Business and Public Management
Major:
Finance
Faculty Research Advisor(s):
Abootaleb Shirvani
Abstract:
This study delves into the intricate dynamics of risk and returns within the portfolio of healthcare companies in Mainland China, recognizing their pivotal role in public health and innovation. Against the backdrop of China's escalating healthcare demands, strategic investment in healthcare entities becomes paramount, demanding a delicate equilibrium between risk and reward. This research uses Markowitz's mean-variance optimization framework to ascertain the optimal portfolio weights for a curated selection of healthcare stocks traded on the Chinese stock market spanning from 2013 to 2021.
The investigation juxtaposes the performance of these portfolios against three prominent Chinese healthcare indexes, SZHCSI, FTXIN9, and SZH150, alongside key Chinese indices, including SZHC50, SE50, SSEC, SE380, and SE180 as benchmarks. Results indicate a notable downturn in indexes during the COVID-19 period, with the three healthcare indexes exhibiting superior performance over the market with heightened volatility. Interestingly, the constructed portfolio index demonstrates positive returns and minimal volatilities, exhibiting superior performance post-COVID period compared to major Chinese healthcare indexes and market indices.
This study's findings underscore the critical significance of strategic investment in healthcare companies, particularly during periods of medical advancement and enhancements in healthcare infrastructure, thereby advocating for informed decision-making in portfolio management within the healthcare sector.