Multi-period portfolio optimization under possibility measures

Xili Zhang, Weiguo Zhang and Weilin Xiao

Economic Modelling, 2013, vol. 35, issue C, 401-408

Abstract: A single-period portfolio selection theory provides optimal tradeoff between the mean and the variance of the portfolio return for a future period. However, in a real investment process, the investment horizon is usually multi-period and the investor needs to rebalance his position from time to time. Hence it is natural to extend the single-period fuzzy portfolio selection to the multi-period case based on the possibility theory. In this paper, we propose the possibilistic expected value and variance for the terminal wealth with fuzzy forms after T periods by using the central value operator. Classes of multi-period possibilistic mean-variance models are formulated originally under the assumption that the proceeds of risky assets are fuzzy variables. Besides, we apply a particle swarm optimization algorithm to solve the proposed multi-period fuzzy portfolio selection models. A numerical example is given to illustrate the performance of the proposed models and algorithm.

Keywords: Multi-period portfolio selection; Possibility theory; Central value; Partial swarm optimization (PSO) (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:401-408

DOI: 10.1016/j.econmod.2013.07.023

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