Determining the Optimal Stock Portfolio of Agricultural Companies in Tehran Stock Exchange

Document Type : Research Article-en

Authors

• A.H. Chizari ¹
• K. Vazirian ²

¹ Department of Agricultural Economics, Faculty of Economics & Agricultural Development, University of Tehran, Iran

² Department of Agricultural Economics, Faculty of Economics & Agricultural Development, at University of Tehran, Iran

https://doi.org/10.22067/jead.2022.71461.1063

Abstract

Efficient Asset allocation and investment portfolio selection are among the most critical and challenging issues in investment management and a continuous concern for investors. When investors invest in the capital market, they expect their portfolio to perform well. Therefore, this study determines the optimal stock portfolio of agricultural companies in the Tehran Stock Exchange (TSE). Thirty-two most important agriculture companies in the (TSE), with monthly data from 2014-2020, were selected from Iran's two most essential agriculture industries, the food and beverage industries, and the sugar industry. Two portfolios for the food and beverage industry and sugar industry goals: minimizing portfolio variance and maximizing portfolio return using the Markowitz model with two different scenarios and applying two minimum investment constraints of 1% and optimized maximum investment of 20% without considering these two constraints. The efficiency, variance, and Sharp ratios are also calculated. The results showed that both food and beverage industry portfolios and the sugar industry portfolios became more efficient when optimized to maximize portfolio returns. The result also indicates the food and beverage industry was more efficient than the portfolio of the sugar industry. In this portfolio, the amount of investment for the shares of Salmin Company was 86.7% and for Mehram Company was 13.3%.

Keywords

• Markowitz Model
• Optimization
• Portfolio Return
• Risk
• Sharp Ratio

20.1001.1.20084722.1400.35.4.6.2

Main Subjects

• Marketing and Trade of Agriculture Production

References

Alipoor Leili, V. 2018. Investigating the Relationship between Rate of Return and Risk in the Sugar Group in Tehran Stock Exchange. Master thesis, Tehran University. (In Persian)

2- Basuki, B., S. Sukono, D. Sofyan, S.S. Madio, and N. Puspitasari. 2019 Linear Algebra on investment portfolio optimization model. In a presentation at the 4^th Annual Conference" Applied Science and Engineering." 2019 December.

3- Campbell, R., R. Huisman, and K. Koedijk. 2001. Optimal portfolio selection in a Value-at-Risk framework. Journal of Banking and Finance, 25(9): 1789-1804.

4- Ghadiri Moghadam, A., and H. Rafie Darani. 2010. Investigating and Determining the Optimal Stock Portfolio of Companies Active in the Food Industry of the Tehran Stock Exchange. Journal of Agricultural Economics and Development, 24(3): 304-309. (In Persian)

5- Hoseini Kasgari, H., A. Hoseini Yekani, and S. Abedi. 2017. Optimal Portfolio Selection of Stocks of Food Industry Companies in Tehran Stock Exchange Using the Combined Forecasting Method: Application of Mean-Variance-Skew Pattern. Agricultural Economics, 11(4): 81-105. (In Persian)

6- Joonz, CH. 1943. Investment Management, Translation of Tehrani, R and Noorbakhsh, A. Knowledge Look Publications: 1-500.

7- Luenberger, D.G. 1997. Investment Science. OUP Catalogue.

8- Moosavi, Y., A. Gholami, and S. Samei. 2016. Optimizing the Investment Portfolio of Sepah Bank Investment Company using the combined Markowitz and Garch Multivariate Model. Applied Economics, 18: 1-14. (In Persian with English abstract)

9- Narayan, P. 1990. Farm Planning Under Risk: An Application of the Captial Asset Pricing Model to New Zealand Agriculture. Doctoral dissertation, Lincoln University.

10- Poornima, S., and A.P. Remesh. 2016. Construction of Optimal Portfolio Using Sharpe’s Single Index Model: A Study with Reference to Automobiles and Pharmaceutical Sector. International Journal of Applied Research, 1(13): 21-24.

11- Sadeghi, M. 2014. Comparative study of Iran Stock Exchange with other stock exchanges in the world and the reasons for its strengths and weaknesses. Journal of Accounting Research, 3(12): 167-193. (In Persian)

12- Salim Odloo, A. 2017. Determining the Relationship Between Crop Risk and their Prices in Iran by Provinces. Master thesis, Tehran University. (In Persian)

13- Shirzad, S. 2016. Investigating the Factors Affecting the Stock Market of Agricultural Industries in Tehran Stock Exchange. Master thesis, Tehran University. (In Persian)

14- Tehran Stock Exchange, 2019. https://www.tse.ir/.