Quantitative Empirical Research on Portfolio Optimization Based on Sharpe Ratio and Market Index

Abstract

With the increasing complexity of modern economic systems and the globalization of financial markets, investment has become a crucial means for individuals and institutions to achieve asset appreciation and hedge against inflation. However, a core dilemma emerges in investment practice: How should investors choose between scientifically model-driven rational decision-making and market experience-oriented passive strategies? This paper investigates two portfolio construction approaches: quantitative analysis based on mathematical models versus market cumulative return rates derived from historical market performance. Representative companies across various industries were selected, with historical stock market data collected for each entity. Employing quantitative empirical methods as the core framework, this study focuses on comparing the performance between Sharpe ratio-optimized investment portfolios and market benchmark returns, aiming to validate the effectiveness of rationally model-driven strategies in practical applications. Through comparative analysis of cumulative returns between Sharpe ratio-optimized portfolios and broad-based market indices, this research reveals that market benchmarks significantly outperform active strategies driven by mathematical models. The theoretical framework and empirical conclusions presented in this paper provide multidimensional support for investors seeking to establish scientific and rational investment decision-making systems.