A Study of the Effectiveness of Asset Allocation Under Extreme Macro Shocks: a Comparative Analysis Based on the Efficient Frontier Before and after the COVID-19 Pandemic

DOI

10.2991/978-94-6239-642-5_19How to use a DOI?

Keywords

Makowitz model; asset allocation; efficient frontier

Abstract

As a typical macro-extreme shock event, the COVID-19 pandemic has a significant impact on global financial markets. Based on the Markowitz model, this study compares and analyses the changes in the effective frontier and the minimum variance frontier of assets before and after the epidemic, aiming to assess the effectiveness of asset allocation under extreme shocks. Daily data of 21 stocks from five sectors, the S&P500 index and the risk-free rate, aggregated into monthly returns between 2017 and 2023, are used for modelling. The results of the study show that the effective frontier shifted significantly to the lower right during the epidemic, indicating a significant increase in risk at the same level of return, a decrease in expected return at the same level of risk, and an overall deterioration in the price/performance ratio of the investment; and an overall shift to the right and a narrowing of the vertical range of the minimum variance frontier reflecting an increase in the overall risk of the market and a tightening of the distribution of returns. This study confirms the negative impact of extreme macro shocks on the efficiency of asset allocation and provides empirical references for risk management and asset portfolio construction under extreme situations.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Jialiang Shan
PY  - 2026
DA  - 2026/04/29
TI  - A Study of the Effectiveness of Asset Allocation Under Extreme Macro Shocks: a Comparative Analysis Based on the Efficient Frontier Before and after the COVID-19 Pandemic
BT  - Proceedings of the 2026 11th International Conference on Financial Innovation and Economic Development (ICFIED 2026)
PB  - Atlantis Press
SP  - 172
EP  - 180
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-642-5_19
DO  - 10.2991/978-94-6239-642-5_19
ID  - Shan2026
ER  -