A DOWNSIDE RISK APPROACH FOR THE PORTFOLIO SELECTION PROBLEM WITH FUZZY RETURNS

Teresa León, Vicente Liern, Paulina Marco, José Vicente Segura and Enriqueta Vercher
Additional contact information
Paulina Marco: Universitat de València
José Vicente Segura: Universidad Miguel Hernández
Enriqueta Vercher: Universitat de València

Fuzzy Economic Review, 2004, vol. IX, issue 1, 61-77

Abstract: This paper presents a new possibilistic programming approach to the portfolio selection problem. It is based on two issues: the approximation of the rates of return on securities by means of fuzzy numbers of trapezoidal form, for which we use the interval-valued ex-pectation defined by Dubois and Prade (1987), and the perception that down-side risk is a more realistic description of an investor’s preferences. We use a data set from the Spanish stock market to illustrate the performance of our method.

Keywords: portfolio selection; fuzzy returns; downside risk function; fuzzy LR-numbers; interval-valued expectation; linear programming. (search for similar items in EconPapers)
JEL-codes: G11 D80 (search for similar items in EconPapers)
Date: 2004
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