Document Type : Original Article
Authors
1 Department of Industrial Engineering, Iran University of Science and Technology, Tehran, Iran;
2 Tehran IUST
Abstract
Purpose: Diversification is an essential component of risk management in the investment field. Among the various methods at hand, the establishment of an equal-weight stock portfolio is widely acknowledged as a simple and efficient strategy. This research aims to introduce a new approach based on the equal-weighted stock portfolio strategy to enhance its efficiency in managing risk and making financial decisions.
Methodology: The proposed approach integrates the equal-weight stock portfolio strategy with risk measurement and evaluation tools. By employing common risk measures from the investment management literature, stocks are first evaluated and screened. The remaining stocks are then used to form an investment portfolio using the equal weight portfolio strategy. The risk measures utilized in this research encompass variance, standard deviation, semi standard deviation, value at risk, conditional value at risk, entropic value at risk, drawdown at risk, conditional drawdown at risk, and entropic drawdown at risk.
Findings: To evaluate the performance of the proposed approach, an experimental case study is conducted using monthly historical data of S&P 500 index symbols. The results are compared with those obtained using the traditional equal-weight stock portfolio formation approach. The empirical findings of this study carry practical implications for investors and investment fund managers.
Originality/Value: This research contributes to the field by offering an innovative perspective on stock screening and investment portfolio formation, which can also serve as a valuable measurement criterion.
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