A multiobjective interval portfolio framework for supporting investor’s preferences under different risk assumptions

Carla Henriques and Maria Elisabete Duarte Neves

Journal of the Operational Research Society, 2019, vol. 70, issue 10, 1639-1661

Abstract: This paper is aimed at presenting a multiobjective interval portfolio framework which considers investment decisions under different risk assumptions. New surrogate problems are obtained for the mean-absolute deviation risk measure based on the concept of necessary subtraction between interval numbers. A proposal for obtaining the efficient portfolio solutions is also suggested, which allows accounting for three types of investment strategies. Indices of robustness have also been computed, which allow assessing the assets which are more often selected irrespective of the investment strategy followed, and regardless of the business cycle contemplated. Results illustrate the trade-off between risk and return, being also consistent with the type of strategy followed by the investor. Overall, we were able to conclude that less prone to risk investors might find the formulation based on the mean-absolute necessary deviation more appealing since it allows reaching, in general, lower volatility of returns.

Date: 2019
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DOI: 10.1080/01605682.2019.1571004

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