Abstract
Big alpha equities are highly desirable in various financial applications. A Power Enhancement Method can be used to detect big alpha stocks. In this paper, we aim at analyzing the properties of big alpha stocks and building connections between detecting such stocks and portfolio construction. Based on analysis of big alpha stocks, we propose two distinct portfolio strategies. Our simple equally weighted portfolio is highly volatile and could not achieve satisfactory performance, while our more sophisticated Markowitz method-based portfolio manages to control risk, and outperforms both the S&P 500 and our first strategy with lower risk, higher compound return and a higher Sharpe ratio.