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Multi‐period portfolio selection with investor views based on scenario tree

Author

Listed:
  • Zhao, Daping
  • Bai, Lin
  • Fang, Yong
  • Wang, Shouyang

Abstract

How to measure investor views and apply it in multi-period investment is an important problem in portfolio selection. This paper attempts to construct a portfolio selection model with extreme situations and extend it under the multi-period framework. First, we modify a portfolio selection model to fit the extreme cases of 0% or 100% confidence views, then we establish a new programming problem based on optimization approach and figure out the explicit solutions. Second, we extend the model to multi-period form and discretize the results with scenario tree, which solves the multi-period problems. Third, we build an international portfolio with CVaR risk measurement. The numerical tests show that the new multi-period selection model performs better than the others.

Suggested Citation

  • Zhao, Daping & Bai, Lin & Fang, Yong & Wang, Shouyang, 2022. "Multi‐period portfolio selection with investor views based on scenario tree," Applied Mathematics and Computation, Elsevier, vol. 418(C).
  • Handle: RePEc:eee:apmaco:v:418:y:2022:i:c:s0096300321008961
    DOI: 10.1016/j.amc.2021.126813
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    References listed on IDEAS

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