Scintific Journal of "Islamic Finance Researches" (IFR)

Portfolio Management Based on the Topology of the Iranian Stock Market Network

Document Type : Science - Research (Islamic Capital Market)

Authors

1 Ph.D. Candidate, Islamic Azad University (Central Tehran Branch), Tehran, Iran

2  Assistant Professor of Financial Management, Islamic Azad University (Central Tehran Branch), Tehran, Iran.

3 Assistant Professor of Financial Management (Central Tehran Branch), Tehran, Iran.

Abstract

The stock market is a complex financial system with heterogeneous members; it can produce huge amounts of data. It is clear that analyzing this huge data and inferring practical results from that creates a significant competitive advantage for its participants. One method of analyzing financial market data expanded significantly after the global financial crisis is complex network-based analysis that considers the structure of interdependencies of a system's members. Therefore, the current study analyzes the Iranian stock market using the graph theory in mathematics. First, the correlation network of stock market groups is constructed in three time scales of daily, seasonal and annual, and then their topology will be compared. In the next stage, using the centrality indexes in the graph theory, the importance of each market group is calculated and the groups are ranked in the network. The results of this study have significant implications for market participants and regulators for making investment decisions, regulating and controlling risk.

Keywords

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Scintific Journal of
Volume 10, Issue 1 - Serial Number 19
November 2020
Pages 151-186
  • Receive Date: 28 December 2020
  • Revise Date: 20 May 2021
  • Accept Date: 21 May 2021