Optimizing Stock Portfolio of Investment Companies Operating in Field of Petrochemical and Refinery Based on Multivariate GARCH Models

Document Type : Original Article


1 Assistant Professor of Accounting, Department of Accounting and Finance, Petroleum University of Technology, Tehran Faculty of Petroleum, Tehran, Iran (Corresponding Author)

2 Associate Professor of Economics, Department of Oil and Gas Economics, Petroleum University of Technology, Tehran Faculty of Petroleum, Tehran, Iran

3 Master of Finance, Financing and Investment in Oil and Gas Industry, Department of Accounting and Finance, Petroleum University of Technology, Tehran Faculty of Petroleum, Tehran, Iran


The main objective of this research is to optimize the stock portfolio of investment companies operating in the field of petrochemical and refining industries through minimizing risk with respect to the expected return. In this regard, first of all, the compositions of sample firm's portfolios were investigated during 2013 to 2016 and high-weight industries were selected. Then, the risk of return on each selected industry over time was estimated using the multivariate GARCH model in form of Diagonal BEKK method. Further, considering the expected returns, the optimal risk was calculated for each portfolio. Then, the effective factors on portfolio risk-return such as the currency rate, crude oil price, and stock liquidity risk of the selected industries, was token into accounts and the above steps were repeated and the risk of optimized portfolios was recalculated. Findings of the research show that the optimized portfolios have been more optimized by considering effective factors, and whenever there was a lower risk in each of the industries, the corresponding weights have been higher. Also, most portfolios are made up of industries such as the petroleum products, chemicals, rubber and plastics. Therefore, it is appropriate for investment companies to consider the prioritization of industries and the factors affecting risk and return in order to minimize the risk of their stock portfolios at any time, as well as gaining higher expected returns.


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