IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v227y2013i2p385-390.html
   My bibliography  Save this article

Fuzzy portfolio model with different investor risk attitudes

Author

Listed:
  • Tsaur, Ruey-Chyn

Abstract

We propose a fuzzy portfolio model designed for efficient portfolio selection with respect to uncertain or vague returns. Although many researchers have studied the fuzzy portfolio model, no researcher has yet attempted a behavioral analysis of the investor in the fuzzy portfolio model. To address this problem, we examined investor risk attitudes—risk-averse, risk-neutral, or risk-seeking behaviors—to discover an efficient method for fuzzy portfolio selection. In this study, we relied on the advantages of possibilistic mean–standard deviation models that we believed would fit the risk attitudes of investors. Thus, we developed a fuzzy portfolio model that focuses on different investor risk attitudes so that fuzzy portfolio selection for investors who possess different risk attitudes can be achieved more easily. Finally, we presented a numerical example of a portfolio selection problem to illustrate ways to address problems presented by a variety of investor risk attitudes.

Suggested Citation

  • Tsaur, Ruey-Chyn, 2013. "Fuzzy portfolio model with different investor risk attitudes," European Journal of Operational Research, Elsevier, vol. 227(2), pages 385-390.
    • Handle: RePEc:eee:ejores:v:227:y:2013:i:2:p:385-390
    DOI: 10.1016/j.ejor.2012.10.036
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221712008016
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2012.10.036?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael J. Best & Jaroslava Hlouskova, 2000. "The efficient frontier for bounded assets," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 52(2), pages 195-212, November.
    2. Li, Xiang & Shou, Biying & Qin, Zhongfeng, 2012. "An expected regret minimization portfolio selection model," European Journal of Operational Research, Elsevier, vol. 218(2), pages 484-492.
    3. Jong-Shi Pang, 1980. "A New and Efficient Algorithm for a Class of Portfolio Selection Problems," Operations Research, INFORMS, vol. 28(3-part-ii), pages 754-767, June.
    4. Best, Michael J. & Grauer, Robert R., 1990. "The efficient set mathematics when mean-variance problems are subject to general linear constraints," Journal of Economics and Business, Elsevier, vol. 42(2), pages 105-120, May.
    5. Leon, T. & Liern, V. & Vercher, E., 2002. "Viability of infeasible portfolio selection problems: A fuzzy approach," European Journal of Operational Research, Elsevier, vol. 139(1), pages 178-189, May.
    6. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    7. Giove, Silvio & Funari, Stefania & Nardelli, Carla, 2006. "An interval portfolio selection problem based on regret function," European Journal of Operational Research, Elsevier, vol. 170(1), pages 253-264, April.
    8. Srichander Ramaswamy, 1998. "Portfolio selection using fuzzy decision theory," BIS Working Papers 59, Bank for International Settlements.
    9. Fishburn, Peter C, 1989. "Retrospective on the Utility Theory of von Neumann and Morgenstern," Journal of Risk and Uncertainty, Springer, vol. 2(2), pages 127-157, June.
    10. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    11. Jiuping Xu & Xiaoyang Zhou & Desheng Wu, 2011. "Portfolio selection using λ mean and hybrid entropy," Annals of Operations Research, Springer, vol. 185(1), pages 213-229, May.
    12. Li, Xiang & Qin, Zhongfeng & Kar, Samarjit, 2010. "Mean-variance-skewness model for portfolio selection with fuzzy returns," European Journal of Operational Research, Elsevier, vol. 202(1), pages 239-247, April.
    13. Andre F. Perold, 1984. "Large-Scale Portfolio Optimization," Management Science, INFORMS, vol. 30(10), pages 1143-1160, October.
    14. Voros, J., 1986. "Portfolio analysis--an analytic derivation of the efficient portfolio frontier," European Journal of Operational Research, Elsevier, vol. 23(3), pages 294-300, March.
    15. Tanaka, Hideo & Guo, Peijun, 1999. "Portfolio selection based on upper and lower exponential possibility distributions," European Journal of Operational Research, Elsevier, vol. 114(1), pages 115-126, April.
    16. Merton, Robert C., 1972. "An Analytic Derivation of the Efficient Portfolio Frontier," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(4), pages 1851-1872, September.
    17. Li, Jun & Xu, Jiuping, 2009. "A novel portfolio selection model in a hybrid uncertain environment," Omega, Elsevier, vol. 37(2), pages 439-449, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Wei, 2015. "Artificial bee colony algorithm for constrained possibilistic portfolio optimization problem," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 429(C), pages 125-139.
    2. Liu, Weilong & Zhang, Yong & Liu, Kailong & Quinn, Barry & Yang, Xingyu & Peng, Qiao, 2023. "Evolutionary multi-objective optimisation for large-scale portfolio selection with both random and uncertain returns," QBS Working Paper Series 2023/02, Queen's University Belfast, Queen's Business School.
    3. Jin, Xiu & Chen, Na & Yuan, Ying, 2019. "Multi-period and tri-objective uncertain portfolio selection model: A behavioral approach," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 492-504.
    4. Wei Chen & Yun Wang & Mukesh Kumar Mehlawat, 2018. "A hybrid FA–SA algorithm for fuzzy portfolio selection with transaction costs," Annals of Operations Research, Springer, vol. 269(1), pages 129-147, October.
    5. Anna Łyczkowska-Hanćkowiak, 2019. "Sharpe’s Ratio for Oriented Fuzzy Discount Factor," Mathematics, MDPI, vol. 7(3), pages 1-16, March.
    6. Yin-Yin Huang & Ruey-Chyn Tsaur & Nei-Chin Huang, 2022. "Sustainable Fuzzy Portfolio Selection Concerning Multi-Objective Risk Attitudes in Group Decision," Mathematics, MDPI, vol. 10(18), pages 1-15, September.
    7. Yong-Jun Liu & Wei-Guo Zhang, 2018. "Fuzzy portfolio selection model with real features and different decision behaviors," Fuzzy Optimization and Decision Making, Springer, vol. 17(3), pages 317-336, September.
    8. Ruey-Chyn Tsaur, 2015. "Fuzzy portfolio model with fuzzy-input return rates and fuzzy-output proportions," International Journal of Systems Science, Taylor & Francis Journals, vol. 46(3), pages 438-450, February.
    9. Yin-Yin Huang & I-Fei Chen & Chien-Liang Chiu & Ruey-Chyn Tsaur, 2021. "Adjustable Security Proportions in the Fuzzy Portfolio Selection under Guaranteed Return Rates," Mathematics, MDPI, vol. 9(23), pages 1-18, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ruey-Chyn Tsaur, 2015. "Fuzzy portfolio model with fuzzy-input return rates and fuzzy-output proportions," International Journal of Systems Science, Taylor & Francis Journals, vol. 46(3), pages 438-450, February.
    2. Zhang, Wei-Guo & Zhang, Xi-Li & Xiao, Wei-Lin, 2009. "Portfolio selection under possibilistic mean-variance utility and a SMO algorithm," European Journal of Operational Research, Elsevier, vol. 197(2), pages 693-700, September.
    3. Kuen-Suan Chen & Ruey-Chyn Tsaur & Nei-Chih Lin, 2022. "Dimensions Analysis to Excess Investment in Fuzzy Portfolio Model from the Threshold of Guaranteed Return Rates," Mathematics, MDPI, vol. 11(1), pages 1-13, December.
    4. Chen, Wei & Zhang, Wei-Guo, 2010. "The admissible portfolio selection problem with transaction costs and an improved PSO algorithm," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(10), pages 2070-2076.
    5. Zhang, Wei-Guo & Wang, Ying-Luo, 2008. "An analytic derivation of admissible efficient frontier with borrowing," European Journal of Operational Research, Elsevier, vol. 184(1), pages 229-243, January.
    6. Kuen-Suan Chen & Yin-Yin Huang & Ruey-Chyn Tsaur & Nei-Yu Lin, 2023. "Fuzzy Portfolio Selection in the Risk Attitudes of Dimension Analysis under the Adjustable Security Proportions," Mathematics, MDPI, vol. 11(5), pages 1-16, February.
    7. Li, Ting & Zhang, Weiguo & Xu, Weijun, 2013. "Fuzzy possibilistic portfolio selection model with VaR constraint and risk-free investment," Economic Modelling, Elsevier, vol. 31(C), pages 12-17.
    8. Wei Chen, 2009. "Weighted portfolio selection models based on possibility theory," Fuzzy Information and Engineering, Springer, vol. 1(2), pages 115-127, June.
    9. Zhang, Wei-Guo & Xiao, Wei-Lin & Xu, Wei-Jun, 2010. "A possibilistic portfolio adjusting model with new added assets," Economic Modelling, Elsevier, vol. 27(1), pages 208-213, January.
    10. Zhang, Xili & Zhang, Weiguo & Xiao, Weilin, 2013. "Multi-period portfolio optimization under possibility measures," Economic Modelling, Elsevier, vol. 35(C), pages 401-408.
    11. Yin-Yin Huang & Ruey-Chyn Tsaur & Nei-Chin Huang, 2022. "Sustainable Fuzzy Portfolio Selection Concerning Multi-Objective Risk Attitudes in Group Decision," Mathematics, MDPI, vol. 10(18), pages 1-15, September.
    12. Zhang, Wei-Guo & Zhang, Xili & Chen, Yunxia, 2011. "Portfolio adjusting optimization with added assets and transaction costs based on credibility measures," Insurance: Mathematics and Economics, Elsevier, vol. 49(3), pages 353-360.
    13. Ruey-Chyn Tsaur & Chien-Liang Chiu & Yin-Yin Huang, 2021. "Fuzzy Portfolio Selection in COVID-19 Spreading Period Using Fuzzy Goal Programming Model," Mathematics, MDPI, vol. 9(8), pages 1-15, April.
    14. Guo, Sini & Yu, Lean & Li, Xiang & Kar, Samarjit, 2016. "Fuzzy multi-period portfolio selection with different investment horizons," European Journal of Operational Research, Elsevier, vol. 254(3), pages 1026-1035.
    15. Zhang Peng & Gong Heshan & Lan Weiting, 2017. "Multi-Period Mean-Absolute Deviation Fuzzy Portfolio Selection Model with Entropy Constraints," Journal of Systems Science and Information, De Gruyter, vol. 4(5), pages 428-443, October.
    16. Li, Ting & Zhang, Weiguo & Xu, Weijun, 2015. "A fuzzy portfolio selection model with background risk," Applied Mathematics and Computation, Elsevier, vol. 256(C), pages 505-513.
    17. Liu, Yong-Jun & Zhang, Wei-Guo & Zhang, Pu, 2013. "A multi-period portfolio selection optimization model by using interval analysis," Economic Modelling, Elsevier, vol. 33(C), pages 113-119.
    18. Zhang, Wei-Guo & Zhang, Xi-Li & Xu, Wei-Jun, 2010. "A risk tolerance model for portfolio adjusting problem with transaction costs based on possibilistic moments," Insurance: Mathematics and Economics, Elsevier, vol. 46(3), pages 493-499, June.
    19. Li, Bo & Zhang, Ranran, 2021. "A new mean-variance-entropy model for uncertain portfolio optimization with liquidity and diversification," Chaos, Solitons & Fractals, Elsevier, vol. 146(C).
    20. Bo Zhang & Jin Peng & Shengguo Li, 2015. "Uncertain programming models for portfolio selection with uncertain returns," International Journal of Systems Science, Taylor & Francis Journals, vol. 46(14), pages 2510-2519, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:227:y:2013:i:2:p:385-390. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.