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A novel two-phase robust portfolio selection and optimization approach under uncertainty: A case study of Tehran stock exchange

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  • Pejman Peykani
  • Emran Mohammadi
  • Armin Jabbarzadeh
  • Mohsen Rostamy-Malkhalifeh
  • Mir Saman Pishvaee

Abstract

Portfolio construction is one of the most critical problems in financial markets. In this paper, a new two-phase robust portfolio selection and optimization approach is proposed to deal with the uncertainty of the data, increasing the robustness of investment process against uncertainty, decreasing computational complexity, and comprehensive assessments of stocks from different financial aspects and criteria are provided. In the first phase of this approach, all candidate stocks’ efficiency is measured using a robust data envelopment analysis (RDEA) method. Then in the second phase, by applying robust mean-semi variance-liquidity (RMSVL) and robust mean-absolute deviation-liquidity (RMADL) models, the amount of investment in each qualified stock is determined. Finally, the proposed approach is implemented in a real case study of the Tehran stock exchange (TSE). Additionally, a sensitivity analysis of all robust models of this study is examined. Illustrative results show that the proposed approach is effective for portfolio selection and optimization in the presence of uncertain data.

Suggested Citation

  • Pejman Peykani & Emran Mohammadi & Armin Jabbarzadeh & Mohsen Rostamy-Malkhalifeh & Mir Saman Pishvaee, 2020. "A novel two-phase robust portfolio selection and optimization approach under uncertainty: A case study of Tehran stock exchange," PLOS ONE, Public Library of Science, vol. 15(10), pages 1-43, October.
    • Handle: RePEc:plo:pone00:0239810
    DOI: 10.1371/journal.pone.0239810
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    Cited by:

    1. Alireza Ghahtarani & Ahmed Saif & Alireza Ghasemi, 2022. "Robust portfolio selection problems: a comprehensive review," Operational Research, Springer, vol. 22(4), pages 3203-3264, September.
    2. Pejman Peykani & Mostafa Sargolzaei & Amir Takaloo & Shahla Valizadeh, 2023. "The Effects of Monetary Policy on Macroeconomic Variables through Credit and Balance Sheet Channels: A Dynamic Stochastic General Equilibrium Approach," Sustainability, MDPI, vol. 15(5), pages 1-21, March.
    3. Pejman Peykani & Mojtaba Nouri & Mir Saman Pishvaee & Camelia Oprean-Stan & Emran Mohammadi, 2023. "Credibilistic Multi-Period Mean-Entropy Rolling Portfolio Optimization Problem Based on Multi-Stage Scenario Tree," Mathematics, MDPI, vol. 11(18), pages 1-23, September.

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