Review the optimum portfolios to be helpful for investors

Abstract

Analyzing expected rate of return according to the assets and estimations of value at enormously help the company in optimum use of financial and physical resources. if an assortment of investments is organized in such a way to be the best possible set, investors, by minimizing the attendant risks, can approach the optimum rate of return that is close to the market value. In this study, Capital Assets Pricing Model (CAPM), Fama and French three factor model and Value-at-Risk (VaR) model and their forecasting capabilities are thoroughly analyzed. Investors are aptly informed to make a conscious decision in extracting the best portfolio set. The study sample consisted of 118 companies listed in Tehran Stock Exchange, on a monthly basis during 2003-2010 and was selected. This study is based on assumptions that each model is efficient enough to forecast the arrangement of optimum portfolios. The regressiontest of out hypotheses indicates that CAPM model and Fama and French model are competent enough to forecast the structure of portfolios but VaR model's estimations must be cautiously applied. In this essay we analyze the power of estimation of CAPM, F&F and VaR models in determining the optimum portfolio to be helpful for investors.