An Application of Graph Theory Towards Portfolio Judgement

This paper introduces a new outlook in portfolio management with the help of graph theory, a widely used discrete mathematical tool in engineering branches. For a given portfolio, this paper describes a methodology to compute a balance index. Empirical study of this paper finds that high balance index portfolio is recommended for better return. With such a new approach of risk analysis, investors will also be able to take their portfolio restructuring decision subject to the availability of investment capital. This new outlook opens number of challenging research area in both portfolio management and graph theory.