Portfolio selection using λ mean and hybrid entropy

Jiuping Xu, Xiaoyang Zhou and Desheng Wu ()

Annals of Operations Research, 2011, vol. 185, issue 1, 213-229

Abstract: This paper develops a λ mean-hybrid entropy model to deal with portfolio selection problem with both random uncertainty and fuzzy uncertainty. Solving this model provides the investor a tradeoff frontier between security return and risk. We model the security return as a triangular fuzzy random variable, where the investor’s individual preference is reflected by the pessimistic-optimistic parameter λ. We measure the security risk using the hybrid entropy in this model. Algorithm is developed to solve this bi-objective portfolio selection model. Beside, a numerical example is also presented to illustrate this approach. Copyright Springer Science+Business Media, LLC 2011

Keywords: Portfolio selection; λ mean; Hybrid entropy; Fuzzy set; Fuzzy random variable; Triangular fuzzy number; Optimization; Programming (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10479-009-0550-3

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