Optimal Asset Allocation of Portfolio of Banking System in Different Conditions of Iranian Economy (Case Study of Tejarat Bank)

Having the portfolio of accessible assets is one of the main strategies and one of the central goals of the banks and financial institutions. Risk and return are two determinants of assets selection. The Banks such as all of the oder financial institutions are looking to select the portfolio of assets with the least risk and maximum return over time and under different economic conditions. This study try to find the evidence in order to banks are changing their portfolio in different economic condition and how their optimal portfolio is and how much they are affected by economic conditions. In fact, the main question is whether the banks are stuck in the asset and do not react in different economic conditions or have the necessary flexibility. For this purpose, the data of Tejarat Bank's is useng from the bank's balance sheet during the period 2001-2018. The research findings show that Tejarat Bank's asset portfolio has reacted to economic conditions in the period under review. During the low economic growth growh, the bank's asset portfolio hnstead during economic low growh had less risk and higher returns.