Comparison of the Markowitz Model and Index Model for Portfolio Optimization in the Chinese Stock Market

Markowitz Model (MM) and Sharpe’s Single Index (SIM) are two classical practical models in portfolio theory. Currently the Chinese stock market is booming, therefore, it worth testing whether MM SIM can effectively spread risk security market. This paper establishes based on monthly observations of 10 stocks CSI300. During analysis process, there an additional optimization constraint that selling short not allowed. Finally, some conclusions obtained: first, has a significant impact optimal portfolio, while minimum-variance very little affected. What’s more, although both disperse specific risk, have better performance by providing higher rewards given same level bearing lower certain return. These great significance to investors market, which help them obtain maximum utility through asset diversification.