A credibilistic mean-semivariance-per portfolio selection model for Latin America

Fernando García, Jairo González-Bueno, Javier Oliver, Rima Tamošiūnienė

Research output: Contribution to journalArticlepeer-review

15 Scopus citations

Abstract

Many real-world problems in the financial sector have to consider different objectives which are conflicting, for example portfolio selection. Markowitz proposed an approach to determine the optimal composition of a portfolio analysing the trade-off between return and risk. Nevertheless, this approach has been criticized for unrealistic assumptions and several changes have been proposed to incorporate investors’ constraints and more realistic risk measures. In this line of research, our proposal extends the mean-semivariance portfolio selection model to a multiobjective credibilistic model that besides risk and return, also considers the price-to-earnings ratio to measure portfolio performance. Uncertain future returns and PER ratio of each asset are approximated using L-R power fuzzy numbers. Furthermore, we consider budget, bound and cardinality constraints. To solve the constrained portfolio optimization problem, we use the algorithm NSGA-II. We assess the proposed approach generating a portfolio with shares included in the Latin American Integrated Market. Results show that this new approach is a good alternative to solve the portfolio selection problem when multiple objectives are considered.

Original languageEnglish
Pages (from-to)225-243
Number of pages19
JournalJournal of Business Economics and Management
Volume20
Issue number2
DOIs
StatePublished - 2019
Externally publishedYes

Keywords

  • Credibility theory
  • Evolutionary multiobjective optimization
  • Fuzzy portfolio selection
  • L-R power fuzzy numbers
  • Mean-semivariance-PER

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