System Engineering and Productivity

System Engineering and Productivity

Distributional Robust Portfolio Optimization Based on Kalmar Ratio

Document Type : Research Paper

Authors
Mona Beyranvand 1
Sayyed Mohammad Reza Davoodi 2
Mohammadreza Sharifi-Ghazvini 3
1 Ph.D. Student, Department of Industrial Management, Dehaghan Branch, Islamic Azad University, Dehaghan, Iran
2 Corresponding author: Associate Professor, Department of Industrial Management, Dehaghan Branch, Islamic Azad University, Dehaghan, Iran
3 Assistant Professor, Department of Industrial Management, Dehaghan Branch, Islamic Azad University, Dehaghan, Iran
10.22034/msb.2024.2029173.1210
Abstract
In today's competitive environment, designing a robust program for stock portfolio selection is important and necessary. The stock portfolio selection problem is one of the most important problems in the field of finance. Robust optimization is a practical solution to problems in which the value and distribution of parameters are unknown. In the present study, the goal is to maximize a distributed robust stock portfolio based on the Kalamar ratio with the Wasserstein metric, which is a reward-risk ratio and its calculation depends on the portfolio return distribution. Reward-risk ratios are of great importance for risk-averse investors by simultaneously considering return and risk. The research strategy for robustness of the return distribution parameter is to consider all returns that are in a neighborhood of the empirical portfolio distribution, which is determined by the Wasserstein metric criterion. The sample portfolio of the present study consists of 8 indices or industries from the Tehran Stock Exchange with the highest trading volume in the period from the beginning of 1389 to the end of 1400 and in a weekly time horizon. The test data is divided into 5 periods and to evaluate the results of the distributional robust portfolio in comparison with the portfolio without this property, the result of dividing the average of the Kalmar ratios in the 5 mentioned periods by their standard deviation was used. The optimization results using the particle swarm optimization algorithm show that the distributional robust portfolio improves the mentioned ratio by 27.1 and in addition, the minimum Kalmar ratio in the 5 periods in the distributional robust portfolio is higher than in the portfolio without this property.

Highlights

  • Robust optimization is considered a practical solution for problems in which the amount and distribution of parameters are unknown
  • In the current research, the goal is to maximize the distribution-based stock portfolio based on Kalmar's ratio with Wassersten's metric.

Keywords
Kalamar ratio
Distributional robust basket
Particle swarm algorithm

Copyright ©, Mona Beyranvand, Sayyed Mohammad Reza Davoodi, Mohammadreza Sharifi-Ghazvini

 

License

This article is released under the Creative Commons Attribution (CC BY 4.0) license. Anyone is free to copy, share, translate, and adapt this article for any purpose, whether commercial or non-commercial, as long as proper citation is given to the authors and original publication.

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System Engineering and Productivity
Volume 4, Issue 1 - Serial Number 10
Serial No. 10, Spring Quarterly
Spring 2024
Pages 59-69

  • Receive Date 15 May 2024
  • Revise Date 06 June 2024
  • Accept Date 18 June 2024
  • First Publish Date 20 June 2024
  • Publish Date 20 June 2024