Fuzzy multi-period portfolio selection model with time-varying loss aversion

Yong-Jun Liu and Wei-Guo Zhang

Journal of the Operational Research Society, 2021, vol. 72, issue 4, 935-949

Abstract: This paper deals with multi-period portfolio selection problem in a fuzzy environment, in which the effects of investors’ time-varying asymmetric attitudes to losses and gains on portfolio selection are taken into consideration. In the paper, a definition of time-varying loss aversion is presented to describe the aforementioned time-varying asymmetric attitudes to losses and gains. A fuzzy multi-period portfolio selection model based on this new definition of time-varying loss aversion is formulated. Then, an improved co-evolutionary particle swarm optimization (ICPSO) algorithm is designed to solve the proposed model. The comparison analysis between the proposed model and the fixed-parameter loss aversion model is provided to demonstrate the fact that the proposed model can significantly affect the performance of portfolio selection. Finally, a numerical example is given to illustrate the application of the proposed model and the efficiency of the designed algorithm.

Date: 2021
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DOI: 10.1080/01605682.2019.1705191

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