The aim of this paper is to observe whether generating a portfolio having return more than index by investigating the return performance of index's stocks and capital structure of firms in index in a certain period. The second aim of this paper is to provide portfolio diversification by using the method of this study. In this paper, firms and stocks on BIST-100 index are referenced for empirical study. Method-Stocks are chosen from BIST-100 index with regard to certain capital structure of firms in stocks, and second orderly stochastic dominance test is implemented on these stocks. Dominant stocks are defined to generate a portfolio after stochastic test and this portfolio's return performance is compared to the index'-s return. Findings-The portfolio, whose stocks are filtered by a certain capital structure and then chosen by second orderly stochastic dominance test, has return performance better than index's return. Conclusion-This paper is indicating that second orderly stochastic dominance method and capital structure is an important investigation to generate a portfolio having higher returns more than index's.

This paper compares the performances of stock selection methods developed by artificial neural network (ANN), second order stochastic dominance (SSD), and Markowitz portfolio optimization by generating annual portfolios whose stocks are selected from several types of indexes traded in the Borsa Istanbul. Daily returns in SSD and Markowitz, and annual ratios in ANN models, are taken as inputs, with the following annual returns as outputs. By the perspective of stock selection literature, this study carries unique value for including comparisons of these methods with the purpose of generating portfolios with higher returns. Thus, two questions emerge: "Are these methods able to overcome losses during financial crises and bear or bull periods, and can they provide positive alpha?" Results indicate that average returns of portfolios generated by ANN are relatively higher than SSD and Markowitz, but all three models provide positive alpha over indexes. However, none of the models could overcome negative returns during economic crises.

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In this study, the real economic activity and monetary policy in the US are examined in comparison with the foreign trade balance and exchange rates, using Qual VAR and nonlinear VAR models. We found that the foreign trade with Brazil, Canada and Mexico do not lead to a possible recession in the US. The value of the domestic currency of Brazil, Canada and Mexico against the US dollar does not contribute to a possible recession over the foreign exchange market. We also show that a contraction in the US economy and contractionary monetary policy will lead to the appreciation of the US dollar by leading to capital inflows. Although the shadow interest rate may have asymmetric effects on the foreign trade balance with Canada and USD/CAD, we find that the foreign trade balance with Mexico and USD/MXN will be affected positively/negatively by an increase/decrease in the shadow interest rate.