A multiobjective credibilistic portfolio selection model. Empirical study in the Latin American integrated market

Fernando Garcia Garcia, Jairo González-Bueno (), Francisco Guijarro () and Javier Oliver ()
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Jairo González-Bueno: Pontifical Bolivarian University, Colombia
Francisco Guijarro: Polytechnic University of Valencia, Spain
Javier Oliver: Polytechnic University of Valencia, Spain

Entrepreneurship and Sustainability Issues, 2020, vol. 8, issue 2, 1027-1046

Abstract: This paper extends the stochastic mean-semivariance model to a fuzzy multiobjective model, where apart from return and risk, also liquidity is considered to measure the performance of a portfolio. Uncertainty of future return and liquidity of each asset are modeled using L-R type fuzzy numbers that belong to the power reference function family. The decision process of this novel approach takes into account not only the multidimensional nature of the portfolio selection problem but also realistic constraints by investors. Particularly, it optimizes the expected return, the semivariance and the expected liquidity of a given portfolio, considering cardinality constraint and upper and lower bound constraints. The constrained portfolio optimization problem resulting is solved using the algorithm NSGA-II. As a novelty, in order to select the optimal portfolio, this study defines the credibilistic Sortino ratio as the ratio between the credibilistic risk premium and the credibilistic semivariance. An empirical study is included to show the effectiveness and efficiency of the model in practical applications using a data set of assets from the Latin American Integrated Market.

Keywords: fuzzy portfolio selection; L-R fuzzy numbers; credibility theory; mean-semivariance-liquidity; evolutionary multiobjective optimization; emerging financial markets (search for similar items in EconPapers)
JEL-codes: G11 G17 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ssi:jouesi:v:8:y:2020:i:2:p:1027-1046

DOI: 10.9770/jesi.2020.8.2(62)

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