Portfolio Formation Based on the Fundamental Vaviables and Their Rating on the Beta and Return

Purchasing stock portfolio is one of the ways of risk mitigation in the light of investment process on securities. The research applies two measures, Z and G, to demonstrate stock portfolio. Fundamental variables applied in the research are Z index, which demonstrates financial authenticity of firm and G index that shows the growth rate of firm’s net profit. Accordingly, The stocks of 153 firms have been rated in Tehran stock exchange in to two patterns comprising nine portfolios and twelve portfolios based on Beta and the return during a five year period. The results showed that the concordance of these portfolios’rating in a 9 porffolio pattern based on risk indexes and return is higher than a 12 portfolio pattern. In addition, concordance of the rate of portfolios based on the return index is higher than the concordance of rates based on the beta index. Z1G3 portfolio has the highest rate in a 9 portfolio pattern based on the return mean. In other words, it yields the highest return in terms of beta mean index. In terms of beta mean, Z2G1 portfolio has the highest rate, that is, it has the least beta.