The Application of Aumann-Serrano Index of Riskiness in Portfolio Optimization: A Case Study of Tehran Stock Exchange
In a risky situation probabilities of states are available.Until recently, normal distribution has been used widely in financial applications for a risky situation. Recent studies have shown that normal distribution is not appropriate for financial data and that simple variance of data as an index o...
| Main Authors: | , |
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| Format: | Article |
| Language: | fas |
| Published: |
Allameh Tabataba'i University Press
2015-11-01
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| Series: | Faṣlnāmah-i Pizhūhish/hā-yi Iqtiṣādī-i Īrān |
| Subjects: | |
| Online Access: | http://ijer.atu.ac.ir/article_4608_f7c8b565266b0808c676f5477b8af6c0.pdf |
| Summary: | In a risky situation probabilities of states are available.Until recently, normal distribution has been used widely in financial applications for a risky situation. Recent studies have shown that normal distribution is not appropriate for financial data and that simple variance of data as an index of riskiness is a misleading indicator of riskiness. Aumann-Serrano (2008) introduce a new economic index of riskiness to overcome these problems. In this research we use Aumann-Serrano Index to build an optimal portfolio for 23 major stocks in Tehran Stock Exchange. We compare our results with equally weighted portfolio and sharpe-ratio based portfolio and find that economic index of riskiness outperforms others with a 50.6 percent return.
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| ISSN: | 1726-0728 |