STOCHASTIC PORTFOLIO SELECTION WITH DIVERSIFICATION APPROACH

With increasing use of portfolios, investors are always looking for the best combination of assets to get the highest return with the lowest risk. In this paper, initially, a model of the mar_x0002_ket is presented by the stochastic portfolio theory (SPT) and fea_x0002_tures like Growth rate, Excess growth rate are mentioned. Then, functionally-generated portfolios are defined with the help of which diversity weighted portfolios with parameters p ∈ (0, 1), p 0 and combination of these two parameters and it is evaluated by sharp ratio and total growth rate. Finally, by obtaining the daily closing price of 10 stocks in Tehran Stock Exchange (TSE) ,the perfor_x0002_mance of diversity weighted portfolios has been investigated.