doi: 10.17706/ijapm.2025.15.1.51-68
An Empirical Study of the Markowitz Mean-Variance Model and the CAPM Model in the Stock Market
,
,
Meilan Qiu
1,*
- 1 School of Mathematics and Statistics, Huizhou University, Guangdong, Huizhou, 516007, China.
- 2 School of Statistics, Beijing Normal University, Beijing, 100875, China.
- Manuscript received October 13, 2024
- accepted February 10, 2025
- published June 23, 2025
Abstract
This paper focuses on the practical application of Markowitz’s mean-variance model and Capital Asset Pricing Model (CAPM) in the stock market. Stock data was obtained using the Tushare interface, data preprocessing and visualization were performed by using Python. Multiple stocks from the Shanghai and Shenzhen markets were analyzed using the mean-variance model, and an efficient frontier chart was created. Through empirical research, the optimal investment portfolio with the highest Sharpe ratio and lowest variance was identified, and their expected returns and volatility were compared. Finally, the CAPM model was fitted using the least square methods to evaluate the returns and volatility of individual stocks in relation to the market. Besides, the Fama-French three-factor model, which is a developmental model based on CAPM, was also used for the analysis. This study provides valuable investment strategy references for investors. It addresses the concerns of investors regarding the evaluation of portfolio returns and risks, achieving optimal asset allocation. Furthermore, it deepens the understanding of the significance of Markowitz’s mean-variance model and the CAPM model in financial risk management.
Keywords
- Markowitz mean-variance model
- capital asset pricing model
- Fama-French three-factor model
- optimal portfolio
- least square method
- Sharpe ratio
How to Cite
Rupeng Song, Chingfei Luo, and Meilan Qiu, "An Empirical Study of the Markowitz Mean-Variance Model and the CAPM Model in the Stock Market," International Journal of Applied Physics and Mathematics, vol. 15, no. 1, pp. 51-68, 2025. https://doi.org/ 10.17706/ijapm.2025.15.1.51-68
Copyright & License
Copyright © 2025 by the authors. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).