Optimal Asset Allocation Using Predicting Stock and Coin outputs in the Iranian Capital Market

Document Type : RESEARCH PAPER

Authors

1 Assistant Professor, Department of Economics. Faculty of Administrative Sciences and Economics. University of Isfahan Isfahan. Iran

2 Assistant Professor, Department of Management. Faculty of Administrative Sciences and Economics. University of Isfahan. Isfahan. Iran

3 Ms in Economics , Department of Economics. Faculty of Administrative Sciences and Economics. University of Isfahan. Isfahan. Iran

Abstract

Abstract
One of the most important factors in deciding on investment is the amount of risk and output on capital assets. Choosing a set of optimal assets is often done by exchanging between risk and output, the higher the risk, so investors expect higher outputs. Portfolio optimization is about choosing the best combination of assets to maximize output on investment and minimize risk as much as possible. Therefore, one of the important steps in portfolio formation is to determine the optimal ratio or weight of assets to reduce the risk of investment portfolio. This important step is made by choosing the right strategy. The present study investigates the optimal allocation of assets (coins and stocks) using macroeconomic variables. The purpose of this study is to compare the performance of a predictability-based portfolio with a strategy-based portfolio (1/N).
The results of the comparative test of variances and the Sharp ratio showed that the strategy of mean variance with a specified risk aversion coefficient (three and five) in all windows was able to defeat the strategy (1/N). The reason for the better performance of the mean variance strategy is that the underlying decision making is the predictability of asset outputs, and the weighting of each asset is based on the projected maximum output per month. The weighting of each asset per month is based on the maximum expected output.

Keywords

References

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