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Fuzzy turnover rate chance constraints portfolio model

Barak, S ; Sharif University of Technology | 2013

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  1. Type of Document: Article
  2. DOI: 10.1016/j.ejor.2013.01.036
  3. Publisher: 2013
  4. Abstract:
  5. One concern of many investors is to own the assets which can be liquidated easily. Thus, in this paper, we incorporate portfolio liquidity in our proposed model. Liquidity is measured by an index called turnover rate. Since the return of an asset is uncertain, we present it as a trapezoidal fuzzy number and its turnover rate is measured by fuzzy credibility theory. The desired portfolio turnover rate is controlled through a fuzzy chance constraint. Furthermore, to manage the portfolios with asymmetric investment return, other than mean and variance, we also utilize the third central moment, the skewness of portfolio return. In fact, we propose a fuzzy portfolio mean-variance-skewness model with cardinality constraint which combines assets limitations with liquidity requirement. To solve the model, we also develop a hybrid algorithm which is the combination of cardinality constraint, genetic algorithm, and fuzzy simulation, called FCTPM
  6. Keywords:
  7. Genetic algorithm ; Mean-variance-skewness model ; Cardinality constraints ; Credibility measure ; Fuzzy chance constraints ; Investment returns ; Portfolio selection ; Portfolio turnover ; Third central moments ; Trapezoidal fuzzy numbers ; Computer simulation ; Finance ; Fuzzy sets ; Higher order statistics ; Genetic algorithms
  8. Source: European Journal of Operational Research ; Volume 228, Issue 1 , 2013 , Pages 141-147 ; 03772217 (ISSN)
  9. URL: http://www.sciencedirect.com/science/article/pii/S0377221713000830