A novel methodology for perception-based portfolio management

Kocherlakota Satya Pritam (), Trilok Mathur (), Shivi Agarwal (), Sanjoy Kumar Paul () and Ahmed Mulla ()
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Kocherlakota Satya Pritam: Pandit Deendayal Energy University
Trilok Mathur: Birla Institute of Technology and Science, Pilani campus
Shivi Agarwal: Birla Institute of Technology and Science, Pilani campus
Sanjoy Kumar Paul: University of Technology Sydney
Ahmed Mulla: Pandit Deendayal Energy University

Annals of Operations Research, 2022, vol. 315, issue 2, No 21, 1107-1133

Abstract: Abstract Selecting and investing in stock market with right proportions is one of the major challenges. Majority of the investors end up losing their invested equity capital due to uncertainty in the market. The present study provides a novel framework for novice investors to construct portfolio based on multicriteria decision making techniques under fuzzy environment. The scores obtained from these techniques were used to introduce two non-dimensional parameters for categorization of risky and non-risky assets. Three perceptions portfolios were constructed based on the proposed non-dimensional parameters along with fractional lion clustering algorithm. In order to demonstrate the proposed framework, an illustrative application is included in equity portfolio selection. The returns and risks of these perception based portfolios are compared to major Index funds for validating the efficiency and are found to overpower the Index funds with significant margins by maintaining the risk comparable to Index funds. Further, Markowitz based efficient frontier is plotted for better understanding of optimal returns and risk for perception based investment.

Keywords: Portfolio allocation; Multi-criteria decision making; Fractional clustering algorithm; Stock market index; Perception-based optimization (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10479-022-04530-9

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