Multiobjective approach to portfolio optimization in the light of the credibility theory
The present research proposes a novel methodology to solve the problems faced by investors who take into consideration different investment criteria in a fuzzy context. The approach extends the stochastic mean-variance model to a fuzzy multiobjective model where liquidity is considered to quantify p...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Vilnius Gediminas Technical University
2020-10-01
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| Series: | Technological and Economic Development of Economy |
| Subjects: | |
| Online Access: | https://www.mla.vgtu.lt/index.php/TEDE/article/view/13189 |
| _version_ | 1818874314525507584 |
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| author | Fernando Garcia Jairo González-Bueno Francisco Guijarro Javier Oliver Rima Tamošiūnienė |
| author_facet | Fernando Garcia Jairo González-Bueno Francisco Guijarro Javier Oliver Rima Tamošiūnienė |
| author_sort | Fernando Garcia |
| collection | DOAJ |
| description | The present research proposes a novel methodology to solve the problems faced by investors who take into consideration different investment criteria in a fuzzy context. The approach extends the stochastic mean-variance model to a fuzzy multiobjective model where liquidity is considered to quantify portfolio’s performance, apart from the usual metrics like return and risk. The uncertainty of the future returns and the future liquidity of the potential assets are modelled employing trapezoidal fuzzy numbers. The decision process of the proposed approach considers that portfolio selection is a multidimensional issue and also some realistic constraints applied by investors. Particularly, this approach optimizes the expected return, the risk and the expected liquidity of the portfolio, considering bound constraints and cardinality restrictions. As a result, an optimization problem for the constraint portfolio appears, which is solved by means of the NSGA-II algorithm. This study defines the credibilistic Sortino ratio and the credibilistic STARR ratio for selecting the optimal portfolio. An empirical study on the S&P100 index is included to show the performance of the model in practical applications. The results obtained demonstrate that the novel approach can beat the index in terms of return and risk in the analyzed period, from 2008 until 2018.
First published online 8 October 2020 |
| first_indexed | 2024-12-19T13:08:38Z |
| format | Article |
| id | doaj.art-c8b8835328f442bb8482b2d13c5ec7b8 |
| institution | Directory Open Access Journal |
| issn | 2029-4913 2029-4921 |
| language | English |
| last_indexed | 2024-12-19T13:08:38Z |
| publishDate | 2020-10-01 |
| publisher | Vilnius Gediminas Technical University |
| record_format | Article |
| series | Technological and Economic Development of Economy |
| spelling | doaj.art-c8b8835328f442bb8482b2d13c5ec7b82022-12-21T20:19:58ZengVilnius Gediminas Technical UniversityTechnological and Economic Development of Economy2029-49132029-49212020-10-0110.3846/tede.2020.13189Multiobjective approach to portfolio optimization in the light of the credibility theoryFernando Garcia0Jairo González-Bueno1Francisco Guijarro2Javier Oliver3Rima Tamošiūnienė4Department of Economics and Social Sciences, Universitat Politècnica de València, 46022 València, SpainFaculty of Business Administration, Universidad Pontificia Bolivariana, 681017 Bucaramanga, ColombiaI.U. de Matemàtica Pura i Aplicada, Universitat Politècnica de València, 46022 Valencia, SpainDepartment of Economics and Social Sciences, Universitat Politècnica de València, 46022 València, SpainFaculty of Business Management, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT-10223 Vilnius, LithuaniaThe present research proposes a novel methodology to solve the problems faced by investors who take into consideration different investment criteria in a fuzzy context. The approach extends the stochastic mean-variance model to a fuzzy multiobjective model where liquidity is considered to quantify portfolio’s performance, apart from the usual metrics like return and risk. The uncertainty of the future returns and the future liquidity of the potential assets are modelled employing trapezoidal fuzzy numbers. The decision process of the proposed approach considers that portfolio selection is a multidimensional issue and also some realistic constraints applied by investors. Particularly, this approach optimizes the expected return, the risk and the expected liquidity of the portfolio, considering bound constraints and cardinality restrictions. As a result, an optimization problem for the constraint portfolio appears, which is solved by means of the NSGA-II algorithm. This study defines the credibilistic Sortino ratio and the credibilistic STARR ratio for selecting the optimal portfolio. An empirical study on the S&P100 index is included to show the performance of the model in practical applications. The results obtained demonstrate that the novel approach can beat the index in terms of return and risk in the analyzed period, from 2008 until 2018. First published online 8 October 2020https://www.mla.vgtu.lt/index.php/TEDE/article/view/13189evolutionary multiobjective optimizationfuzzy portfolio selectionmean-CVaR-liquiditymean-semivariance-liquiditytrapezoidal fuzzy numbersNSGA-II |
| spellingShingle | Fernando Garcia Jairo González-Bueno Francisco Guijarro Javier Oliver Rima Tamošiūnienė Multiobjective approach to portfolio optimization in the light of the credibility theory Technological and Economic Development of Economy evolutionary multiobjective optimization fuzzy portfolio selection mean-CVaR-liquidity mean-semivariance-liquidity trapezoidal fuzzy numbers NSGA-II |
| title | Multiobjective approach to portfolio optimization in the light of the credibility theory |
| title_full | Multiobjective approach to portfolio optimization in the light of the credibility theory |
| title_fullStr | Multiobjective approach to portfolio optimization in the light of the credibility theory |
| title_full_unstemmed | Multiobjective approach to portfolio optimization in the light of the credibility theory |
| title_short | Multiobjective approach to portfolio optimization in the light of the credibility theory |
| title_sort | multiobjective approach to portfolio optimization in the light of the credibility theory |
| topic | evolutionary multiobjective optimization fuzzy portfolio selection mean-CVaR-liquidity mean-semivariance-liquidity trapezoidal fuzzy numbers NSGA-II |
| url | https://www.mla.vgtu.lt/index.php/TEDE/article/view/13189 |
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