How does investment portfolio change in pre and post epidemic era?--experience from Chinese medical and pharmaceutical industry

Abstract

The exogenesis shock, the Covid-19 epidemic, is considered as a big shock in the financial market. The paper discussed how the investment portfolio comprising of the top ten medical and pharmaceutical stocks, changes before and after the break of epidemic. Three constraints are taken into consideration to provide more information to investors. Also, the Medical and Pharmaceutical Index instead of the market return ratio is considered as standard, allowing it much closer to the reality. The research finds that the investors have greater confidence on medical and pharmaceutical industry in the post-epidemic era than in the pre-epidemic era, presented by higher annualized average return and lower Sharpe ratio. The research of this paper will provide some portfolio-construction experience under the global negative shock. At the same time, it is also worth noting that this paper mainly focused on the changes of portfolios with the aim of creating the maximum Sharpe ratio and the minimum standard deviation under certain constraints, whose results showed that the market are having growing confidence in the medical and pharmaceutical industry in the post-epidemic era and more capital is flowing to the corporations with out-standing performance in the anti-epidemic period.