Maslow Portfolio Selection for Individuals with Low Financial Sustainability

Zongxin Li, Xinge Li, Yongchang Hui and Wing-Keung Wong
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Zongxin Li: School of Mathematics and Statistics, Xi’an Jiaotong University, Xi’an 710049, China
Xinge Li: School of Mathematics and Statistics, Xi’an Jiaotong University, Xi’an 710049, China
Yongchang Hui: School of Mathematics and Statistics, Xi’an Jiaotong University, Xi’an 710049, China

Sustainability, 2018, vol. 10, issue 4, 1-11

Abstract: In this paper, we extend Maslow’s need hierarchy theory and the two-level optimization approach by developing the framework of the Maslow portfolio selection model (MPSM) by solving the two optimization problems to meet the need of individuals with low financial sustainability who prefer to satisfy their lower-level (safety) need first, and, thereafter, look for higher-level (self-actualization) need to maximize the optimal return. We illustrate our proposed model with real American stock data from the S&P index and conduct the out-of-sample analysis to compare the performance of our proposed Variance-CVaR (conditional value-at-risk) MPSM with both traditional mean-variance and mean-CVaR models. Our empirical analysis shows that our proposed Variance-CVaR MPSM is not only sustainable, but also obtains the best out-of-sample performance in the sense that the optimal portfolios obtained by using our proposed Variance-CVaR MPSM obtain the highest cumulative returns in the out-of-sample period among the models used in our paper. We note that our proposed model is not only suitable to individuals with low financial sustainability, but also suitable to institutions or investors with high financial sustainability.

Keywords: portfolio selection; need hierarchy theory; two-level optimization; variance; coherent risk measures (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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