TY - JOUR
T1 - Portfolio Optimization
T2 - A Return-on-Equity Network Analysis
AU - Yan, Xiangzhen
AU - Yang, Hanchao
AU - Yu, Zhongyuan
AU - Zhang, Shuguang
AU - Zheng, Xianrong
N1 - Publisher Copyright:
© 2014 IEEE.
PY - 2024/4/1
Y1 - 2024/4/1
N2 - This article proposes return-on-equity (ROE) networks for portfolio optimization, which integrate the DuPont analysis and graph theory. Portfolio diversification is interpreted as follows: An intercluster relationship of the network structure diversifies business models, whereas an innercluster relationship variegates different industries. The proposed approach is applied to the Chinese stock market. It shows that, in terms of the annualized return, the ROE network optimized portfolio reached 13.20% compared with 6.02% of the Shanghai Stock Exchange (SSE) Composite Index. It also shows that portfolios with 100-200 stocks, which are composed of the top 10%-20% ROE stocks, reached the highest return-risk efficiency.
AB - This article proposes return-on-equity (ROE) networks for portfolio optimization, which integrate the DuPont analysis and graph theory. Portfolio diversification is interpreted as follows: An intercluster relationship of the network structure diversifies business models, whereas an innercluster relationship variegates different industries. The proposed approach is applied to the Chinese stock market. It shows that, in terms of the annualized return, the ROE network optimized portfolio reached 13.20% compared with 6.02% of the Shanghai Stock Exchange (SSE) Composite Index. It also shows that portfolios with 100-200 stocks, which are composed of the top 10%-20% ROE stocks, reached the highest return-risk efficiency.
KW - Complex network
KW - DuPont analysis
KW - diversification
KW - entropy
KW - portfolio optimization
UR - http://www.scopus.com/inward/record.url?scp=85153331781&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85153331781&partnerID=8YFLogxK
U2 - 10.1109/TCSS.2023.3261881
DO - 10.1109/TCSS.2023.3261881
M3 - Article
AN - SCOPUS:85153331781
VL - 11
SP - 1644
EP - 1653
JO - IEEE Transactions on Computational Social Systems
JF - IEEE Transactions on Computational Social Systems
IS - 2
ER -