Beschreibung:
This paper applies return-on-equity networks to portfolio optimization, integrating DuPont analysis and graph theory. Portfolio diversification is interpreted with the network structure, where an inter-cluster relationship diversifies business models, and an inner-cluster relationship variegates different industries. In this work's empirical application to the Chinese stock market, the return-on-equity (ROE) network optimized portfolio reached 13.20% in annualized return against 6.02\% of the Shanghai Stock Exchange Composite Index. The analysis showed that portfolios with 100 to 200 stocks, composed of the top 10%-20% ROE stocks, reached the highest return-risk efficiency