Multi-period portfolio with a dynamic reference point considering disappointment feelings

Zongrun Wang and Tangtang He

Journal of the Operational Research Society, 2022, vol. 73, issue 5, 1073-1084

Abstract: Reference dependence, disappointment feelings and risk aversion are three important behavioural characteristics; the main concern of this paper is their influence (especially that of reference dependence) on portfolio selection. We develop a reference point updating model that divides investors into two types, i.e. negative and positive, based on their responses to minimum requirements. On this basis, utilising prospect theory and disappointment theory, a multi-period portfolio selection frame with some realistic constraints is built. To solve the proposed model, we employ a cuckoo search and compare it with differential evolution, particle swarm optimisation and simulated annealing in an empirical study. In this empirical study, three reference point updating methods are compared and analysed, and the results indicate that negative behaviour yields the best terminal wealth in many cases.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/01605682.2021.1892463 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:tjorxx:v:73:y:2022:i:5:p:1073-1084

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/tjor20

DOI: 10.1080/01605682.2021.1892463

Access Statistics for this article

Journal of the Operational Research Society is currently edited by Tom Archibald

More articles in Journal of the Operational Research Society from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().