Visualized Portfolio Optimization of stock market: Case of TSE

Subject Areas : Financial Mathematics

Fatemeh Lakzaie ¹ ( Department of Mathematics, Semnan University, Semnan, Iran )
Alireza Bahiraie ² ( Department of Mathematics, Semnan University, Semnan, Iran )
saeed mohammadian ³ ( Department of Mathematics, Semnan University, Semnan, Iran )

Received: 2023-01-29 Accepted : 2024-02-23 Published : 2024-02-26

Keywords: Portfolio optimization, Mean-variance theory, Minimum spanning tree,

Abstract :

An investment portfolio is a collection of financial assets consisting of investment tools such as stocks, bonds, and bank deposits, among others, which are held by a person or a group of persons. In this research, we use the Markowitz model to optimize the stock portfolio and identify the minimum spanning tree (MST) structure in the portfolio consisting of 50 stocks traded in the TSE. The observable which is used to detect the minimum spanning tree (MST) of the stocks of a given portfolio is the synchronous correlation coefficient of the daily difference of logarithm of closure price of stocks. The correlation coefficient is calculated between all the possible pairs of stocks present in the portfolio in a given time course. The goal of the present study is to obtain the taxonomy of a portfolio of stocks traded in the TSE by using the information of time series of stock prices only. In this research, report results obtained by investigating the portfolio of the stocks used to compute 50 stocks of the Iran Stock Exchange in the time period from January 2012 to October 2022.

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