An expected regret minimization portfolio selection model

Xiang Li, Biying Shou and Zhongfeng Qin

European Journal of Operational Research, 2012, vol. 218, issue 2, 484-492

Abstract: Fuzzy portfolio selection has been widely studied within the framework of the credibility theory. However, all existing models provide only concentrated investment solutions, which contradicts the risk diversification concept in the classical portfolio selection theory. In this paper, we propose an expected regret minimization model, which minimizes the expected value of the distance between the maximum return and the obtained return associated with each portfolio. We prove that our model is advantageous for obtaining distributive investment and reducing investor regret. The effectiveness of the model is demonstrated by using an example of a portfolio selection problem comprising ten securities in the Shanghai Stock Exchange 180 Index.

Keywords: Uncertainty modeling; Fuzzy variable; Credibility measure; Portfolio selection; Worst regret criterion (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:218:y:2012:i:2:p:484-492

DOI: 10.1016/j.ejor.2011.11.015

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