Portfolio optimization by using meanSharp-βVaR and multi objective MeanSharp-βVaR models

Abstract

The purpose of this study is to develop portfolio optimization and assets allocation using our proposed models. For this, three steps are considered. In the first step, the stock companies screen by their financial data. For second step, we need some inputs and outputs for solving Data Envelopment Analysis (DEA) models. Conventional DEA models assume non-negative data for inputs and outputs. However, many of these data take the negative value, therefore we propose the MeanSharp-beta;VaR (MShbeta;V) model and the Multi Objective MeanSharp-beta;VaR (MOMShbeta;V) model based on Range Directional Measure (RDM) that can take positive and negative values. Also, we consider one of downside risk measures named Value at Risk (VaR) and try to decrease it. After using our proposed models, the efficient stock companies will be selected for making the portfolio. In the third step, Multi Objective Decision Making (MODM) model was used to specify the capital allocation to the stock companies that was selected for the portfolio. Finally, a numerical example of the purposed method in Iranian stock companies is presented.