Portfolio selection based on upper and lower exponential possibility distributions

Portfolio selection based on upper and lower exponential possibility distributions

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Article ID: iaor20001365
Country: Netherlands
Volume: 114
Issue: 1
Start Page Number: 115
End Page Number: 126
Publication Date: Apr 1999
Journal: European Journal of Operational Research
Authors: ,
Keywords: fuzzy sets, programming: quadratic
Abstract:

In this paper, two kinds of possibility distributions, namely, upper and lower possibility distributions are identified to reflect experts' knowledge in portfolio selection problems. Portfolio selection models based on these two kinds of distributions are formulated by quadratic programming problems. It can be said that a portfolio return based on the lower possibility distribution has smaller possibility spread than the one on the upper possibility distribution. In addition, a possibility risk can be defined as an interval given by the spreads of the portfolio returns from the upper and the lower possibility distributions to reflect the uncertainty in real investment problems. A numerical example of a portfolio selection problem is given to illustrate our proposed approaches.

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