A new fuzzy multi-objective higher order moment portfolio selection model for diversified portfolios

Wei Yue and Yuping Wang

Physica A: Statistical Mechanics and its Applications, 2017, vol. 465, issue C, 124-140

Abstract: Due to the important effect of the higher order moments to portfolio returns, the aim of this paper is to make use of the third and fourth moments for fuzzy multi-objective portfolio selection model. Firstly, in order to overcome the low diversity of the obtained solution set and lead to corner solutions for the conventional higher moment portfolio selection models, a new entropy function based on Minkowski measure is proposed as a new objective function and a novel fuzzy multi-objective weighted possibilistic higher order moment portfolio model is presented. Secondly, to solve the proposed model efficiently, a new multi-objective evolutionary algorithm is designed. Thirdly, several portfolio performance evaluation techniques are used to evaluate the performance of the portfolio models. Finally, some experiments are conducted by using the data of Shanghai Stock Exchange and the results indicate the efficiency and effectiveness of the proposed model and algorithm.

Keywords: Portfolio selection; Fuzzy variable; Possibilistic moments; Entropy; Multi-objective evolutionary algorithm (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:465:y:2017:i:c:p:124-140

DOI: 10.1016/j.physa.2016.08.009

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