Application Of CAPM-ARIMA Model And CAPM-GARCH Model In Portfolio

With the grow of economic,the financial market of China has flourished.Since the 1990 s,China's securities market has grown from scratch and developed rapidly.However,the stock market is changing rapidly.An investment decision may make investors earn a lot of money,and it may make investors lose their all as well.Under the circumstances that the risk is determined,the researches on how to make the maximum return and facilitate efficient allocation of scarce financial resources have practical significance.In this paper,three stocks in different fields are selected as the research object in the CSI 300 index stocks.Firstly,based on the higher the Sharpe ratio,the better the portfolio,it can establish the CAPM model.By using R software,we obtain the optimal portfolio weight,return,standard deviation and Sharpe ratio.Secondly,in order to solve the problem that the CAPM model has intrinsic shortages,such as low accuracy of prediction,this paper introduces the CAPM-ARIMA model and the CAPM-GARCH model,and use the two models to find the weight,return,standard deviation and Sharpe ratio of the best investment portfolio of each model.Finally,the CAPM model,CAPMARIMA model and CAPM-GARCH model are compared in terms of return,standard deviation and Sharpe ratio.Some conclusions are obtained as follows:(1)Compared with the CAPM-ARIMA model,the CAPM model has the same return,while the standard deviation of the CAPM-ARIMA model is smaller and the Sharpe ratio is higher.It can be considered that the CAPM-ARIMA model has more reference value in this portfolio,and the weight of the optimal combination is more worthy of reference;(2)Compared with the ARIMA model,the CAPM-GARCH model has a higher return rate,lower standard deviation and a higher Sharpe ratio than the CAPM model.It can be considered that the CAPM-GARCH model is superior to the CAPM model in all aspects,and the weight of its optimal combination is more valuable;(3)The CAPM-ARIMA model has a higher return rate than the CAPM-GARCH model.The standard deviation is also higher,but the Sharpe ratio of the CAPM-ARIMA model is higher.It can be considered that the CAPM-ARIMA model has more reference value in this portfolio.