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Portfolio optimisation: A fuzzy multi-objective approach

Author

Listed:
  • Francesc J Ortí

    (Financiera y Actuarial, Universitat de Barcelona, Avda. Diagonal 696)

  • José B Sáez

Abstract

Markowitz's classical model and other models derived from it have raised the portfolio problem using statistical instruments that assume a regular and efficient market. In this paper, the authors propose an alternative method using fuzzy numbers to represent the uncertainty of the future return on assets. Subsequently, we define measures for risk and for excess return on a portfolio. The resulting problem is a nonlinear multi-objective program with fuzzy parameters. Finally, we introduce one method to solve the resulting problem and an example.

Suggested Citation

  • Francesc J Ortí & José B Sáez, 2008. "Portfolio optimisation: A fuzzy multi-objective approach," Journal of Asset Management, Palgrave Macmillan, vol. 9(2), pages 138-148, July.
    • Handle: RePEc:pal:assmgt:v:9:y:2008:i:2:d:10.1057_jam.2008.16
    DOI: 10.1057/jam.2008.16
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    References listed on IDEAS

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    1. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(2), pages 65-86.
    2. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    3. Isaac, R Mark & James, Duncan, 2000. "Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-187, March.
    4. Black, Fischer, 1972. "Capital Market Equilibrium with Restricted Borrowing," The Journal of Business, University of Chicago Press, vol. 45(3), pages 444-455, July.
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