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Portfolio Optimization With Investor Utility Preference of Higher-Order Moments: A Behavioral Approach

Author

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  • Bekiros, Stelios
  • Loukeris, Nikolaos
  • Eleftheriadis, Iordanis

Abstract

We incorporate advanced higher moments of individual or institutional investors in a new approach dealing with the portfolio selection problem, formulated under a multi-criteria optimization framework. The “integrated portfolio intelligence†model extracts hidden patterns out of company fundamental indices and filters out effects such as trader noise or fraud utilizing advanced big data machine learning modeling. One of the main advantages of this novel system aside from providing with computer-efficient algorithmic optimality and predictive out performance is that it detects and extracts hidden trader behavioral patterns and firm investment “styles†from the data sets of large-scale institutional portfolios, which ultimately leads to the aversion and protection of extensive market manipulation and speculation.

Suggested Citation

  • Bekiros, Stelios & Loukeris, Nikolaos & Eleftheriadis, Iordanis, 2017. "Portfolio Optimization With Investor Utility Preference of Higher-Order Moments: A Behavioral Approach," Review of Behavioral Economics, now publishers, vol. 4(2), pages 83-106, September.
  • Handle: RePEc:now:jnlrbe:105.00000060
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    File URL: http://dx.doi.org/10.1561/105.00000060
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    More about this item

    Keywords

    Utility preference; Support Vector Machines; Genetic Evolution;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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