Portfolio optimization with disutility-based risk measure

Cristinca Fulga

European Journal of Operational Research, 2016, vol. 251, issue 2, 541-553

Abstract: In this paper we propose a quantile-based risk measure which is defined using the modified loss distribution according to the decision maker’s risk and loss aversion. The properties related to different classes of disutility functions are established. A portfolio selection model in the Mean-Risk framework is proposed and equivalent formulations of the model generating the same efficient frontier are given. The advantages of this approach are investigated using real world data from NYSE. The differences between the efficient frontier of the proposed model and the classical Mean-Variance and Mean-CVaR are quantified and interpreted. Extensive experiments show that the efficient portfolios obtained by using the proposed model exhibit lower risk levels and an increased satisfaction compared to the other two Mean-Risk models.

Keywords: Quantile-based risk measures; Mean-Risk model for portfolio optimization; Utility functions (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221715010255
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:251:y:2016:i:2:p:541-553

DOI: 10.1016/j.ejor.2015.11.012

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().