Portfolio optimization with robust possibilistic programming

Document Type : Original Article

Authors

1 Prof., Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran.

2 Ph.D. Candidate, Department of Financial Management, Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran.

Abstract

one of the most important financial and investment issues is Portfolio selection, that seeks to allocate a predetermined capital (wealth) over one or multiple periods between assets and stocks in such a way that the wealth of investor (portfolio owner) is maximized and, Simultaneously, its risk minimized. In the paper, we first propose a mathematical programming model for Portfolio selection to maximize the minimum amount of Sharpe ratios of the portfolio in all periods (max-min problem). Then, due to the uncertain property of the input parameters of such a problem, a robust possibilistic programming model (based on necessity theory) has been developed, which is capable of adjusting the robust degree of output decisions to the uncertainty of the parameters. The proposed model was tested on 27 companies active in the Tehran stock market. In the end, the results of the model demonstrated the good performance of the robust possibilistic programming model. 

Keywords

References

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Iranian Journal of Finance
Volume 3, Issue 2
2019
Pages 44-65

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History

  • Receive Date: 22 July 2019
  • Accept Date: 28 March 2020
  • First Publish Date: 28 March 2020

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