Accounting and Auditing Research

Accounting and Auditing Research

A Model for Optimization and Portfolio Risk Management Using Financial Network Theory in the Iranian Stock Market

Document Type : Original Article

Authors
Seyyed Kazem Ebrahimi 1
Hamid Reza Rajabi 2
1 Associate Professor of Accounting, Faculty of Economics, Administrative Sciences and Management, Semnan University
2 Ph.D candidate in Finance, Faculty of Economics, Administrative Sciences and Management, Semnan University
10.22034/iaar.2024.206119
Abstract
The optimizing the investment portfolio is considered one of the most important topics in capital management. Our goal in this article is to design an optimal portfolio selection model based on the Minimum Spanning Tree method in the Iranian stock market. Designing and compiling a portfolio selection model includes two It is the basic stage. The first stage of choosing the investment portfolio was done using five criteria of centrality, betweenness, distance from the center, distance from correlation and distance from the distance criterion. The result of this work is the formation of two central and peripheral portfolios, respectively. It was the central portfolio and peripheral portfolio the network. In the second step, using risk and return measurement criteria, selected portfolios were optimized and risk managed. At the end, the extracted portfolios were evaluated with the total index and one share of the portfolio for a period of 200 days. The results showed that both portfolios had higher efficiency according to the market conditions. As expected, during the growth of the market, the surrounding portfolio recorded a higher return compared to the market.
Keywords
Stock Market
Portfolio Optimization
Minimum Spanning Tree
Risk Management
Network Theory

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Accounting and Auditing Research
Volume 16, Issue 62
Summer 2024
Pages 181-202