Newcomers' Priorities in Portfolio Selection: A Shannon Entropy Approach

Abstract

Having a good stock portfolio, which is one of the most important factors in making money in the stock market, requires the correct choice of criteria. This issue for new stock traders in the Tehran Stock Exchange (TSE) who do more than 50 per cent of daily transactions in this market, due to their lack of sufficient experience, seems thoroughly essential. As a result, newcomers who were trading in the Tehran Stock Exchange in 2020 have been invited to participate in this study. After identifying the most influential variables in portfolio-selection via Delphi Method, these factors have been ranked based on Shannon’s Entropy Approach. The results show that Familiarity, Net Profit Ratio and Stock Price are respectively the main priorities of new entrants in choosing the stock portfolio. Besides, risk-related variables have generally the least importance in stock portfolio selection from the perspective of new entrants.