Portfolio Construction with Market Multipliers: An Application in BIST

In the portfolio construction process, it is an important process to correctly identify the stocks to be included in the portfolio. There are different studies in the literature that use different valuation methods to determine the right stocks. This study uses the market multipliers method to determine the stocks to be included in the portfolio. In the study, it is investigated whether a return above the return of the Borsa Istanbul (BIST) 100 Index can be obtained with the portfolios to be formed using the market multipliers method. For this purpose, portfolios were formed by using 3 different market multipliers (P/E, FV/EBITDA, and M/B) among the companies in 12 different sectors in the BIST. 15 different portfolios were formed for 5 years and the performance of each portfolio was analyzed. Return and risk calculations of these portfolios were made and compared with the BIST 100 Index. In the study, all of the portfolios created using market multiples provided lower risk and higher returns compared to the BIST 100 Index. In particular, the portfolios constructed with F/K and PD/DD multipliers provided better results. AAsAa result of the study, it was concluded that it would be beneficial for investors to create portfolios by using F/K and PD/DD multipliers in portfolio construction processes.