Multi-objective portfolio selection considering expected and total utility

Xianhe Wang, Yuliang Ouyang, You Li, Shu Liu, Long Teng and Bo Wang

Finance Research Letters, 2023, vol. 58, issue PD

Abstract: To address the challenge of risk minimization associated with investors’ irrational investment decisions in the face of wealth fluctuations, this article integrates prospect theory and disappointment theory into the framework of multi-objective portfolio selection. By concurrently incorporating prospect theory and disappointment theory, this conceptual framework not only considers emotional factors but also offers a comprehensive depiction of individuals’ decision-making processes amidst uncertainty. The proposed portfolio selection model aims to balance return and risk by maximizing both expected and total utility. The effectiveness of the proposed model is validated through comparisons with three other methods.

Keywords: Fuzzy portfolio selection; Expected utility; Prospect theory; Disappointment theory (search for similar items in EconPapers)
JEL-codes: D81 G40 G41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323009248

DOI: 10.1016/j.frl.2023.104552

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