محمدامین نادری

  tochastic Portfolio Theory that was introduced by ‎E.R. ‎Fernholz‎ introduced Almost ‎۲۰ ‎years ‎ago,‎ generates diversified weighted portfolios ‎with ‎‎n‎‎ ‎risky ‎assets with a method called the functional generation of portfolios ‎wich ‎was‎ easy to establish because it was solely in terms of the individual companies market weights.‏ ‎‎‎‎c‎onsidering such a function paved the way for finding simple conditions on large equity markets with ‎n‎‎ ‎risky asstes ‎under which it is possible strictly to outperform the market portfolio in comparison to the previous methods, including continuous-time dynamic programming.‎

In this thesis, we study role market-to-book ratios of stocks (value factor) in return of an asset in the context of stochastic portfolio theory. First with using an ‎auxiliary‎ economic variables with f‎init‏e variation ‎to ‎find a‎ ‎way ‎to‎ produce an asset portfolio along with the companies market captalization (size factor). Then, we compare the relative return of the produced portfolios to the market with two methods‏; These two methods are called Multiplicatively generated portfolios and Additively generated portfolios ‎and ‎w‎e provide conditions based on which the produced portfolios perform better than the market basket in the long term. This cause when the mentioned auxiliary variables are the book values, role of value factor in return such generated portfolios will identify. Several examples of such portfolios and there generation path has been investigated Along with empirical results that identify that in addition to size factor of stocks, the value factor is also effective in portfolio returns‎.