Adjustable Security Proportions in the Fuzzy Portfolio Selection under Guaranteed Return Rates

Yin-Yin Huang, I-Fei Chen, Chien-Liang Chiu and Ruey-Chyn Tsaur
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Yin-Yin Huang: School of Economics and Management, Nanchang Vocational University, 308 Provincial Road, Anyi County, Nanchang 330500, China
I-Fei Chen: Department of Management Sciences, Tamkang University, No.151, Yingzhuan Rd., Tamsui Dist., New Taipei 25137, Taiwan
Chien-Liang Chiu: Department of Banking and Finance, Tamkang University, No.151, Yingzhuan Rd., Tamsui Dist., New Taipei 25137, Taiwan
Ruey-Chyn Tsaur: Department of Management Sciences, Tamkang University, No.151, Yingzhuan Rd., Tamsui Dist., New Taipei 25137, Taiwan

Mathematics, 2021, vol. 9, issue 23, 1-18

Abstract: Based on the concept of high returns as the preference to low returns, this study discusses the adjustable security proportion for excess investment and shortage investment based on the selected guaranteed return rates in a fuzzy environment, in which the return rates for selected securities are characterized by fuzzy variables. We suppose some securities are for excess investment because their return rates are higher than the guaranteed return rates, and the other securities whose return rates are lower than the guaranteed return rates are considered for shortage investment. Then, we solve the proposed expected fuzzy returns by the concept of possibility theory, where fuzzy returns are quantified by possibilistic mean and risks are measured by possibilistic variance, and then we use linear programming model to maximize the expected value of a portfolio’s return under investment risk constraints. Finally, we illustrate two numerical examples to show that the expected return rate under a lower guaranteed return rate is better than a higher guaranteed return rates in different levels of investment risks. In shortage investments, the investment proportion for the selected securities are almost zero under higher investment risks, whereas the portfolio is constructed from those securities in excess investments.

Keywords: fuzzy portfolio model; efficient portfolio; guaranteed return rates; excess investment; shortage investment (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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