Portfolio Optimization and the Momentum- Contrarian Strategy (MCS)- Based Performance: Evidence from Tehran Stock Exchange

Subject Areas : Business Strategy

Homayun Soltanzadeh ¹ , Reza Keykhaei ² , Abdolmajid Abdolbaghi Ataabadi ³ , Mohammad Hosein Arman ⁴

1 - Department of Management , Najafabad Branch, Islamic Azad University, Najafabad, Iran.
2 - Department of Management, Najafabad Branch, Islamic Azad University, Najafabad, Iran.
3 - Department of management,Faculty of Industrial Engineering & Management , Shahrood university of technology, shahrood . iran
4 - Department of Managment, Najafabad Branch, Islamic Azad University, Najafabad, Iran

Received: 2022-09-03 Accepted : 2022-11-16 Published : 2023-07-01

Keywords: Mean-variance model, Portfolio optimization, Optimal Portfolio Momentum, Optimal Portfolio Contrarian,

Abstract :

This study was conducted to determine the stock portfolio with the best return and low-risk investments using momentum-contrarian strategies (MCSs). The momentum-Contrarian strategy is one of the well-known models to construct the portfolio which suggests buying the stocks with the best performance (the winner stocks) and selling the stocks with the worst performance (the loser stocks). The optimal values of the portfolio's objective function and the weight of all assets in the portfolio that are not necessarily the same are calculated by defining a nonlinear multivariate optimization model combined with momentum-contrarian strategies (MCSs). The return information of companies listed on the Tehran Stock Exchange from 2014 to 2019 was used to select the best optimal portfolio. The results confirmed the stability in the profitability of the contrarian optimal portfolio with minimum risk compared to other optimal portfolios. Furthermore, through MATLAB software the optimal weight of assets in the optimal portfolio is calculated based on statistical data.

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