An expected regret minimization portfolio selection model

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Pages (from-to)484-492
Journal / PublicationEuropean Journal of Operational Research
Volume218
Issue number2
Publication statusPublished - 16 Apr 2012

Abstract

Fuzzy portfolio selection has been widely studied within the framework of the credibility theory. However, all existing models provide only concentrated investment solutions, which contradicts the risk diversification concept in the classical portfolio selection theory. In this paper, we propose an expected regret minimization model, which minimizes the expected value of the distance between the maximum return and the obtained return associated with each portfolio. We prove that our model is advantageous for obtaining distributive investment and reducing investor regret. The effectiveness of the model is demonstrated by using an example of a portfolio selection problem comprising ten securities in the Shanghai Stock Exchange 180 Index. © 2011 Elsevier B.V. All rights reserved.

Research Area(s)

  • Credibility measure, Fuzzy variable, Portfolio selection, Uncertainty modeling, Worst regret criterion