Multi-criteria portfolio decision making for TSE
full title:
A Portfolio Recommendation Algorithm for the Tehran Stock Exchange Using Multi-Criteria Decision-Making: A Smart Money Flow and Valuation-Based Approach #
Author: Mohammad Mahdi Masoumian, M.Sc in Industrial Engineering K. N. Toosi University of Technology
Publisher/Release date: 5th.International Congress on Management, Economics, Humanities Education And Business Development | 2026
Abstract
This study aims to address the existing gap in the development of localized algorithmic trading systems for the Tehran Stock Exchange (TSE) by proposing a multi-criteria decision support system that operates on real-time data from the Tehran Securities Exchange Technology Management Company (TSETMC). The proposed algorithm integrates smart money flow indicators, real buyer/seller power ratios, relative valuation metrics (Price-to-Earnings ratio (P/E) and Earnings Per Share (EPS)), and a score-threshold mechanism to enable early detection of downward trends and to recommend an optimal portfolio consisting of the top 5–10 stocks. The necessity of this research arises from fundamental structural differences between the TSE—characterized by order queues, daily price limits, one-sided trading, and lower market efficiency—and major international markets, which render foreign-developed algorithms largely ineffective in the Iranian context. Live implementation of the algorithm over 95 trading days (from August 13, 2025, to November 29, 2025) yielded a cumulative return of 47.08% (net of brokerage fees), with a maximum drawdown of only 2.62% and a Sharpe ratio of 6.73. In comparison, the Tehran Stock Exchange Total Index (TEPIX) recorded a return of 21.22% and a maximum drawdown of 15.68% over the same period. This superior performance is primarily attributable to the algorithm’s timely detection of market declines and automatic reallocation of capital into fixed-income funds. The results demonstrate that simple, locally adapted approaches based on smart money flow can significantly outperform complex models in the Iranian market.
Keywords: Decision support system, Tehran Stock Exchange, Asset management, Multi-criteria decision-making, Algorithmic trading
citation:
Masoumian, M. M. (2026). A Portfolio Recommendation Algorithm for the Tehran Stock Exchange Using Multi-Criteria Decision-Making: A Smart Money Flow and Valuation-Based Approach, 5th.International Congress on Management, Economics, Humanities Education And Business Development