Using Matrix Analysis to Assist in Completing Investment Decisions

Economics is an essential type of science currently, and with the development of linear algebra becoming increasingly rich, it is widely used in problem-solving in economics, especially in the matrix analysis part. When making investment decisions, the help of matrices is indispensable, therefore, extensive learning is needed to make good use of mathematics to solve practical problems. Many models can be applied to matrix analysis. This article utilizes the famous Markowitz combination optimization model, utilizes the covariance matrix, and analyzes how to invest in four stocks based on the idea of minimizing investment risk while obtaining expected returns, making investment decisions very reasonable. In many similar situations, Markowitz combination optimization models can be used to assist investment decision-making, often resulting in better results. Finally, the Markowitz optimization portfolio can be used to solve many investment portfolio points on the effective frontier, and then fitted to these points to obtain the effective frontier. Based on the effective frontier and combined with the Sharpe ratio, the best investment portfolio can be selected from the effective frontier. This article can solve many investment decision-making problems in economics.