Evaluating the Performance of Forecasting Models for Portfolio Allocation Purposes with Generalized GRACH Method

Portfolio theory assumes that investors accept risk. This means that in the equal rate of return on the two assets, the assets were chosen that have a lower risk level. Modern portfolio theory is accepted by investors who believe that they are not cope with the market. So they keep many different types of securities in order to access the optimum efficiency rate that is close to the rate of return on market. One way to control investment risk is establishing the portfolio shares. There are many ways to choose the optimal portfolio shares. Among these methods in this study we use loss functions. For this, we choose all firms from the year 2011 to the end of 2015 that had been a member in the Tehran Stock Exchange. The results of this research show that the likelihood functions have the best performance in Forecasting the optimal portfolio allocation problem.