Stock portfolio optimization using reliability approach
Subject Areas :
Journal of Investment Knowledge
Mir Seyed Mohammad Mohsen Emamat
1
,
Payam Hanafizadeh
2
1 - Department of Industrial Management, Management and Accounting Faculty, Allame Tabataba’i University, Tehran, Iran
2 - Department of Industrial management, Faculty of management and accounting, Allameh Tabataba’i University, Tehran, Iran.
Received: 2020-02-13
Accepted : 2020-12-30
Published : 2020-12-21
Keywords:
investment,
Stochastic Optimization,
Stock Portfolio,
Nonlinear Programming,
Abstract :
The aim of this study is to optimize stock portfolios by considering uncertain returns and the investment’s utility function in the Tehran Stock Exchange. For this purpose, a two-stage recursive algorithm and a utility function have been used. Securities are selected according to the list of 50 most active companies that was published by the Securities and Exchange Organization per season between the years 1390 to 1394. Considering the returns in this five-year period, the returns vector and covariance matrix are determined and after modeling the optimal portfolio is presented. The results show that the optimal portfolio includes: Iran Transfo (0.15), Eghtesad Novin Bank (0.1), Saipa (0.15), Ghadir Investment Company (0.15), Foolad Mobarakeh Esfahan (0.15), Mokhaberat Iran (0.15) and Meli Sanaye Mess Iran (0.15). The quality of the results is compared with real returns in the following year (1395). The results show the high accuracy of the algorithm.
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