Fuzzy portfolio model with different investor risk attitudes

Fuzzy portfolio model with different investor risk attitudes

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Article ID: iaor20131643
Volume: 227
Issue: 2
Start Page Number: 385
End Page Number: 390
Publication Date: Jun 2013
Journal: European Journal of Operational Research
Authors:
Keywords: risk
Abstract:

We propose a fuzzy portfolio model designed for efficient portfolio selection with respect to uncertain or vague returns. Although many researchers have studied the fuzzy portfolio model, no researcher has yet attempted a behavioral analysis of the investor in the fuzzy portfolio model. To address this problem, we examined investor risk attitudes–risk‐averse, risk‐neutral, or risk‐seeking behaviors–to discover an efficient method for fuzzy portfolio selection. In this study, we relied on the advantages of possibilistic mean–standard deviation models that we believed would fit the risk attitudes of investors. Thus, we developed a fuzzy portfolio model that focuses on different investor risk attitudes so that fuzzy portfolio selection for investors who possess different risk attitudes can be achieved more easily. Finally, we presented a numerical example of a portfolio selection problem to illustrate ways to address problems presented by a variety of investor risk attitudes.

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