An expected regret minimization portfolio selection model |
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Authors: | Xiang Li Biying ShouZhongfeng Qin |
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Affiliation: | a State Key Laboratory of Rail Traffic Control and Safety, Beijing Jiaotong University, Beijing 100044, China b Department of Management Sciences, City University of Hong Kong, Hong Kong, China c School of Economics and Management, Beihang University, Beijing 100191, China |
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Abstract: | Fuzzy portfolio selection has been widely studied within the framework of the credibility theory. However, all existing models provide only concentrated investment solutions, which contradicts the risk diversification concept in the classical portfolio selection theory. In this paper, we propose an expected regret minimization model, which minimizes the expected value of the distance between the maximum return and the obtained return associated with each portfolio. We prove that our model is advantageous for obtaining distributive investment and reducing investor regret. The effectiveness of the model is demonstrated by using an example of a portfolio selection problem comprising ten securities in the Shanghai Stock Exchange 180 Index. |
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Keywords: | Uncertainty modeling Fuzzy variable Credibility measure Portfolio selection Worst regret criterion |
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