Journal of Intelligent Strategic Management

Journal of Intelligent Strategic Management

A Two-Stage Framework for Portfolio Optimization: Intelligent Stock Pre-Selection Using Support Vector Machine

Document Type : Original Article

Author
Assistant Professor, Department of Statistics, Faculty of Basic Sciences, Bu-Ali Sina University, Hamadan, Iran.
Abstract
This study investigates the effectiveness of the support vector machine model in portfolio optimization in the Tehran Stock Exchange. The support vector machine model selects a portfolio based on high-frequency data and its risk-adjusted performance with the return of a statistical portfolio predicted by the comparison capital. This model is used in solving classification and regression problems with a supervised learning approach. This research is an applied research that analyzes and models and draws conclusions from empirical evidence based on historical data. The statistical population is the financial and trading information of companies on the Tehran Stock Exchange. The statistical sample with the help of the support vector machine includes a selected portfolio with a volume of 100 companies from 387 companies active in the stock market between the period 1400 and 1401. The data in terms of preparation includes daily, monthly and annual periods. The SVM model, as an efficient tool in predicting returns and managing portfolio risk, can be a suitable alternative to traditional models such as CAPM. This model has the ability to better interpret results and higher accuracy in predicting stock returns. The results showed that the portfolio formed with SVM with an average return of 3.3 percent and a standard deviation of 1.2 percent, has a much better performance than the portfolio based on the traditional CAPM model with an average return of -1 percent and a standard deviation of 5.5 percent. The Sharpe ratio in the SVM model was significantly higher, indicating the higher efficiency of this model in managing stock portfolios.
Keywords

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