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A novel portfolio selection model in a hybrid uncertain environment

  • Li, Jun
  • Xu, Jiuping
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    The future returns of each securities cannot be correctly reflected by the securities data in the past, therefore the statistical techniques and the experts' judgement and experience are combined together to estimate the security returns in the future. In this paper, the returns of each securities are assumed to be fuzzy random variables, then following the ideas of mean variance model a new portfolio selection model in a hybrid uncertain environment is proposed. Moreover, the [lambda]-mean variance efficient frontiers and [lambda]-mean variance efficient portfolios are defined, and the properties of [lambda]-mean variance efficient portfolios located on different [lambda]-mean variance efficient frontiers are discussed. Finally, a numerical example is presented to illustrate the proposed portfolio selection model. On the basis of the results, we can conclude that the proposed model can provide the more flexible results.

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    Article provided by Elsevier in its journal Omega.

    Volume (Year): 37 (2009)
    Issue (Month): 2 (April)
    Pages: 439-449

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    Handle: RePEc:eee:jomega:v:37:y:2009:i:2:p:439-449
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    1. Zmeskal, Zdenek, 2005. "Value at risk methodology under soft conditions approach (fuzzy-stochastic approach)," European Journal of Operational Research, Elsevier, vol. 161(2), pages 337-347, March.
    2. Perez Gladish, B. & Jones, D.F. & Tamiz, M. & Bilbao Terol, A., 2007. "An interactive three-stage model for mutual funds portfolio selection," Omega, Elsevier, vol. 35(1), pages 75-88, February.
    3. Huang, Xiaoxia, 2007. "Two new models for portfolio selection with stochastic returns taking fuzzy information," European Journal of Operational Research, Elsevier, vol. 180(1), pages 396-405, July.
    4. Fang, Yong & Lai, K.K. & Wang, Shou-Yang, 2006. "Portfolio rebalancing model with transaction costs based on fuzzy decision theory," European Journal of Operational Research, Elsevier, vol. 175(2), pages 879-893, December.
    5. Arenas Parra, M. & Bilbao Terol, A. & Rodriguez Uria, M. V., 2001. "A fuzzy goal programming approach to portfolio selection," European Journal of Operational Research, Elsevier, vol. 133(2), pages 287-297, January.
    6. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
    7. Zmeskal, Zdenek, 2001. "Application of the fuzzy-stochastic methodology to appraising the firm value as a European call option," European Journal of Operational Research, Elsevier, vol. 135(2), pages 303-310, December.
    8. Yoshida, Yuji, 2003. "The valuation of European options in uncertain environment," European Journal of Operational Research, Elsevier, vol. 145(1), pages 221-229, February.
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