A chance constrained recourse approach for the portfolio selection problem

Meryem Masmoudi () and Fouad Ben Abdelaziz ()
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Meryem Masmoudi: University of Bahrain
Fouad Ben Abdelaziz: NEOMA Business School, Boulevard André Siegfried

Annals of Operations Research, 2017, vol. 251, issue 1, No 14, 243-254

Abstract: Abstract This paper deals with the stochastic portfolio selection problem when the loss in the portfolio return is considered as a recourse cost. We suppose that the investor would penalize infeasible solutions for uncertain constraints with the most probable highest recourse cost rather than with the expected recourse cost as in the traditional recourse approach. This novel approach which is mixed with a goal programming approach is used to solve a multi-objective stochastic portfolio selection model. We illustrate the paper results by an empirical example using the weekly returns of the Standard & Poor’s 100 securities between January 2001 and November 2011.

Keywords: Portfolio selection; Beta risk; Multi-objective stochastic programming; Chance constrained approach; Recourse approach; Goal programming (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10479-015-1844-2

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