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Fuzzy turnover rate chance constraints portfolio model

Author

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  • Barak, Sasan
  • Abessi, Masoud
  • Modarres, Mohammad

Abstract

One concern of many investors is to own the assets which can be liquidated easily. Thus, in this paper, we incorporate portfolio liquidity in our proposed model. Liquidity is measured by an index called turnover rate. Since the return of an asset is uncertain, we present it as a trapezoidal fuzzy number and its turnover rate is measured by fuzzy credibility theory. The desired portfolio turnover rate is controlled through a fuzzy chance constraint. Furthermore, to manage the portfolios with asymmetric investment return, other than mean and variance, we also utilize the third central moment, the skewness of portfolio return. In fact, we propose a fuzzy portfolio mean–variance–skewness model with cardinality constraint which combines assets limitations with liquidity requirement. To solve the model, we also develop a hybrid algorithm which is the combination of cardinality constraint, genetic algorithm, and fuzzy simulation, called FCTPM.

Suggested Citation

  • Barak, Sasan & Abessi, Masoud & Modarres, Mohammad, 2013. "Fuzzy turnover rate chance constraints portfolio model," European Journal of Operational Research, Elsevier, vol. 228(1), pages 141-147.
    • Handle: RePEc:eee:ejores:v:228:y:2013:i:1:p:141-147
    DOI: 10.1016/j.ejor.2013.01.036
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    References listed on IDEAS

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    Cited by:

    1. Hemant Jalota & Manoj Thakur, 2018. "Genetic algorithm designed for solving portfolio optimization problems subjected to cardinality constraint," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 9(1), pages 294-305, February.
    2. Liu, Yong-Jun & Zhang, Wei-Guo, 2015. "A multi-period fuzzy portfolio optimization model with minimum transaction lots," European Journal of Operational Research, Elsevier, vol. 242(3), pages 933-941.
    3. Chun-Hao Chen & Jonathan Coupe & Tzung-Pei Hong, 2023. "An Accelerated Optimization Approach for Finding Diversified Industrial Group Stock Portfolios with Natural Group Detection," Mathematics, MDPI, vol. 11(14), pages 1-25, July.
    4. Fernando García & Jairo González-Bueno & Javier Oliver & Nicola Riley, 2019. "Selecting Socially Responsible Portfolios: A Fuzzy Multicriteria Approach," Sustainability, MDPI, vol. 11(9), pages 1-14, April.

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