The Application of Conditional Value at Risk in Portfolio Optimization based on Structural Breakpoint Approach in Tehran Securities Exchange

The purpose of the study, the use of conditional value at risk as the Downside Risk Measure on portfolio optimization in the Tehran Securities Exchange Organization. CVaR is defined as the weighted average of expected loss exceeding Value-at Risk (VaR) and having appealing features such as sub-additivity and convexity. The data used in this study is return of 15-day for 45 componeis from 07/01/1388 to 05/31/1392. By Chow breakpoint test, was Selected on 01/07/1392 as a market breakpoint. Therefore, the data were divided into two time periods before and after the break point. The results of the sign test reveal that the second period CVaR is greater than the first period CVaR and the corresponding expected return is higher in the second period. So, ten optimal portfolios for each of periods on various confidence levels were calculated and the efficient frontier was drawn.Also the efficient frontier shows that the Tehran Stock Exchange is prospered in second period.