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Determining the Stock Optimal Portfolio using Value at Risk

Author

Listed:
  • Asgharpur, Hossein

    (Associate Professor of Economics, University of Tabriz)

  • Rezazadeh , Ali

    (Assistant Professor of Economics, Urmia University)

Abstract

The main objective of this study is determination of food industry companies’ stocks optimal portfolio in Tehran stock market. For this purpose, weekly stock prices of the companies has been used over the period of 2008-2012. We calculated VaR using parametric method for stocks and selected the optimal portfolio of stocks. Optimization portfolio is done to minimize portfolio VaR determined according to expected returns through non-linear programming.Results show that greater weight in the optimal portfolio belongs to stocks that have greater expected return and less VaR. A sensitivity analysis with respect to the confidence level shows that the optimal portfolio does not change when the level is changed. Confidence level increasing only increased portfolio value at risk without changing the optimal portfolio weights.

Suggested Citation

  • Asgharpur, Hossein & Rezazadeh , Ali, 2016. "Determining the Stock Optimal Portfolio using Value at Risk," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 2(4), pages 93-118, March.
    • Handle: RePEc:ris:qjatoe:0028
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    More about this item

    Keywords

    Stock optimal portfolio; Value at Risk; Food industry companies; Tehran stock market;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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