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Portfolio Creation Using Graph Characteristics and Testing Its Performance

Author

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  • Jakub Danko
  • Vincent Soltés
  • Tomas Bindzar

Abstract

The aim of this paper is to propose a method for selecting underlying assets for the investment portfolio so that we can achieve a maximum expected return with minimal risk. For this purpose, we describe the portfolio creation process using the minimum spanning tree method, a graph theory tool. Using this theory, we select individual stocks from the Dow Jones Industrial Average index which we include in the portfolio and then compare the performance of such a portfolio with three alternative investments.

Suggested Citation

  • Jakub Danko & Vincent Soltés & Tomas Bindzar, 2022. "Portfolio Creation Using Graph Characteristics and Testing Its Performance," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 18(1), pages 7-17.
    • Handle: RePEc:mje:mjejnl:v:18:y:2022:i:1:7-17
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    Cited by:

    1. Pankaj Agrrawal, 2023. "The Gibbons, Ross, and Shanken Test for Portfolio Efficiency: A Note Based on Its Trigonometric Properties," Mathematics, MDPI, vol. 11(9), pages 1-19, May.
    2. Evangelos Ioannidis & Iordanis Sarikeisoglou & Georgios Angelidis, 2023. "Portfolio Construction: A Network Approach," Mathematics, MDPI, vol. 11(22), pages 1-24, November.

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