Developing an Optimal Portfolio Optimization Model Considering Political Shocks in Iran's Capital Market: A Data Envelopment Analysis and Malmquist Index Approach

Document Type : Original Article

Authors
Mohammad Mirzaie 1
Meysam Doaie 2
Reza Qolami Jamkarani 3
Alireza Davoudi 4
1 PhD Student in Financial Engineering, Department of Finance and Accounting, Qom Branch, Islamic Azad University, Qom, Iran
2 Assistant Professor, Department of Finance and Accounting, Qom Branch, Islamic Azad University, Esfarayen, Iran
3 Associate Professor, Department of Finance and Accounting, Qom Branch, Islamic Azad University, Qom, Iran
4 Associate Professor, Department of Mathematics, Qom Branch, Islamic Azad University, Nishabur, Iran
10.22034/jik.2025.78501.4751
Abstract
The present study aims to develop an optimal model for portfolio selection in Iran’s capital market by incorporating political shocks as one of the key factors influencing financial market behavior. To achieve this, the study employs the Data Envelopment Analysis (DEA) method alongside the Malmquist Productivity Index to evaluate the relative efficiency of listed companies and track changes in performance over time. The research covers the period from 2009 to 2022 and is based on data from companies listed on the Tehran Stock Exchange and the Iran Fara Bourse. Political shock indicators were identified through a combination of literature review, expert opinion, and questionnaire tools. These variables were integrated with financial metrics to build a non-parametric model for analyzing and ranking investment portfolios. The results indicate that political shocks significantly affect the performance and efficiency of investment portfolios. The proposed model serves as a practical decision-making tool for investors operating under political uncertainty. This research contributes to the financial literature by introducing a novel methodology that explicitly accounts for political risk in the portfolio optimization process.
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