Portfolio Risk Management in Securities And Exchange Market Using Stochastic Dominance Method

One of the most important concerns of investors in the capital market is choosing a portfolio that is optimal in terms of profitability and risk. The purpose of this study is to compare the profitability and risk level of portfolios containing different percentages of shares of agricultural and food industry groups and other industries. For this purpose, the daily returns of 18 companies active in the Tehran Stock Exchange for the metals, agriculture, food industry, banking, petrochemical, and chemical groups during the period 2019-2020 were collected and classified into 11 portfolios. The returns of the portfolios were simulated and the best portfolios were determined based on stochastic dominance criteria. The results showed that if the degree of risk aversion of individuals is not known, portfolios 10 and 6, which have 30% and 25% of shares of the agriculture and food industry, respectively, are superior, and if the degree of risk aversion of individuals is clear, portfolio 11 with 30% of shares of agriculture and food industry group is the best portfolio among the risk portfolios. Also, for people with lower risk aversion, portfolio 6 with 25% of agricultural and food industry shares and 20% of petrochemical group shares, and portfolio 4 with 80% of petrochemical group without food and agriculture industry shares are superior portfolios, and for people with a higher degree of risk aversion, portfolios 10 and 2 with 30% and 10% of the shares of agriculture and food industry group, respectively, are superior to the other portfolios. The top portfolios have the highest percentage shares of in the agriculture and food industry and the highest percentage is related to the shares of the petrochemical group. Therefore, the shares of the agriculture and food industries group, along with other shares, can contribute to the superiority of the portfolio. Also, by increasing the percentage of petrochemical stocks in the portfolio, the utility can be maximized.