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A Downside Risk Approach For The Portfolio Selection Problem With Fuzzy Returns

Author

Listed:
  • León, Teresa
  • Liern, Vicente
  • Marco, Paulina

    (Universitat de València)

  • Vicente Segura, José

    (Universidad Miguel Hernández)

  • Vercher, Enriqueta

    (Universitat de València)

Abstract

This paper presents a new possibilistic programming approach to the portfolio selection problem. It is based on two issues: the approximation of the rates of return on securities by means of fuzzy numbers of trapezoidal form, for which we use the interval-valued ex-pectation defined by Dubois and Prade (1987), and the perception that down-side risk is a more realistic description of an investor’s preferences. We use a data set from the Spanish stock market to illustrate the performance of our method.

Suggested Citation

  • León, Teresa & Liern, Vicente & Marco, Paulina & Vicente Segura, José & Vercher, Enriqueta, 2004. "A Downside Risk Approach For The Portfolio Selection Problem With Fuzzy Returns," Fuzzy Economic Review, International Association for Fuzzy-set Management and Economy (SIGEF), vol. 0(1), pages 61-77, May.
  • Handle: RePEc:fzy:fuzeco:v:ix:y:2004:i:1:p:61-77
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    Citations

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    Cited by:

    1. Muteba Mwamba, John, 2014. "Another reason why the efficient market hypothesis is fuzzy," MPRA Paper 64383, University Library of Munich, Germany.
    2. Calvo, Clara & Ivorra, Carlos & Liern, Vicente, 2015. "Finding socially responsible portfolios close to conventional ones," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 52-63.

    More about this item

    Keywords

    portfolio selection; fuzzy returns; downside risk function; fuzzy LR-numbers; interval-valued expectation; linear programming.;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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