Research on the Portfolio Construction Strategies under the Background of Epidemic

Abstract

Under the outbreak of COVID-19, the U.S. stock market experienced the most serious recession in the past decade. How to optimize the investment portfolio has become an important issue that every investor should think about. In this special period, risk-free rate played an important role though it is always neglected by investors. In this research, the pillar industries are taken into consideration and Markowitz portfolio theory is used to examine the result. It shows risk-free rate can be used as an indicator during economic fluctuation. High, low, and medium risk-free rates suggest the comprehensive, stable, and speculative investment tactic. The basic production industry performed well at when high risk-free rate. While the stable investment strategy will be preferred in terms of a low risk-free rate but under the medium or normal risk-free, it puts lots of weight on the innovative industry. In conclusion, this research evaluated the risk-free rate’s influence and proposed a specific investment strategy to deal with it.