Markowitz Model and Python Applied in Financial Risk Management

With the gradual development of financial technology, the improvement of the financial system, and the advent of the big data era, new technologies have been applied in the field of finance. This article aims to explore the integration of the Markowitz model and Python to achieve portfolio optimization and asset allocation. The Markowitz model is a classic portfolio theory that constructs an efficient portfolio by balancing different risks and expected returns. Python, as a powerful programming language and data analysis tool, provides many libraries and methods that can help apply the Markowitz model in practice. In this article, one stock was selected from each of the 13 different popular industries with the help of Python tools for portfolio analysis. The optimal portfolio with the maximum Sharpe ratio and the optimal portfolio with the minimum variance were empirically obtained, and their expected returns, standard deviations, and Sharpe ratios were compared. Besides, the efficient frontier of the asset portfolio was also presented. Through empirical analysis, the author further illustrated the importance of the Markowitz portfolio theory in financial risk management.