Empirical Analysis of Portfolio Allocation During Market Turbulence Based on Efficient Frontier

The global financial markets have experienced considerable turmoil due to the COVID-19 pandemic, in this context, portfolio management becomes critically important. This paper employs Monte Carlo Simulation to determine Efficient Frontier of a portfolio comprising fourteen US technology stocks in the period of COVID-19 pandemic by python, which also allocates portfolios for Minimum Volatility and Maximum Sharpe Ratio, along with their key parameters. According to this study, Maximum Sharpe Ratio portfolio outperforms Minimum Volatility portfolio in terms of cumulative return. However, its important to note that Maximum Sharpe Ratio portfolio also experiences a greater maximum drawdown. Additionally, this paper visually depicts the optimal allocation of asset weights across different levels of risk aversion using a chart. Furthermore, it identifies NVDA as the optimal choice for investors who have low degree of risk-aversion due to its high volatility and expected return. Conversely, IBM and CSCO emerge as the preferred choices for risk-averse investors, as they effectively mitigate the portfolios entire risk.