Optimal portfolio selection based on various risks

Document Type : Research Paper

Authors

Tehran, Enghelab Street, University of Tehran, Science Campus, Faculty of Mathematics, Statistics and Computer Science

Abstract

The allocation of capital among investment opportunities in the stock market, known as optimal portfolio selection, is a focal point in mathematical economics and financial management, and it is of great interest to investors. In recent decades, the formulation of this problem in the form of optimization models and its analysis using mathematical programming has been pursued by numerous researchers. The definition and measurement of risk play a key role in this problem and can lead to various optimal stock portfolios. In this article, considering different criteria for measuring risk, including variance (risk), potential risk, and systematic risk, we explore various models for optimal portfolio selection from both theoretical and numerical perspectives. We delve into two examples of optimization models, namely the Min-Max and Max-Min models. We apply the introduced models to analyze data from the Tehran Stock Exchange market and compare the results.

Keywords

References

[1] S. Javadi, Portfolio selection based on the minimax risk, Master dissertation, University of Tehran, (2019), In Persian.
[2] X. Q. Cai, K. L. Teo, X. Q. Yang and X. Y. Zhou, Portfolio optimization under a minimax rule, Management Science, 46 (2000) 957—972.
[3] M. Ehrgott, Multicriteria Optimization, 2nd ed., Springer, New York, 2005.
[4] H. Markowitz, Potfolio selection, The Journal of Finance, 7 (1952) 77–91.
[5] Y. Sun, G. Aw, K. L. Teo and G. Zhou, Portfolio optimization using a new probabilistic risk measure, Journal of Industrial and Management Optimization, 11 (2015) 1275–1283.

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History

  • Receive Date: 22 July 2019
  • Revise Date: 28 October 2019
  • Accept Date: 04 November 2019
  • Publish Date: 22 May 2019

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