Using grey relational analysis for dynamic portfolio selection in Tehran Stock Exchange

Document Type : conference paper

Authors

1 Department of Industrial Engineering, Khatam University, Tehran, Iran

2 Department of Industrial and Systems Engineering, Tarbiat Modares University, Tehran, Iran

Abstract

In this study, first, a brief survey of various portfolio selection problems is presented to explore the related methodologies, hypotheses, and constraints that are considered in these problems. Among these methods, the grey relational analysis approach is employed to deal with poor information and uncertainties in portfolio selection problems. Return, risk, skewness, and kurtosis are used at the same time as selecting criteria in the portfolio construction. To evaluate the effectiveness of the proposed method, an empirical analysis has done. Therefore, fourteen stocks of various industries like metal, banks, financial institutions, car manufactures, transportation, and petroleum from the thirty largest active companies’ index in Tehran Stock Exchange have been randomly selected and all above mention moments have been calculated for each stocks. In this study, the portfolio is restructured dynamically each week based on the ranking of previous week. The result from the analysis indicates that the selected approach has better performance in comparison with the benchmarks in terms of return, standard deviation, and Sharpe ratio.

Keywords

Main Subjects

References

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History

  • Receive Date: 17 November 2021
  • Revise Date: 20 December 2021
  • Accept Date: 27 December 2021

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