Developing a multi objective possibilistic programming model for portfolio selection problem

Portfolio selection problem is one of the most important issues in the area of financial management in which is attempted to allocate wealth to different assets with controlling the return and risk. The aim of this paper is to obtain the optimum portfolio with regard to the cardinality and threshold constraints. In the paper, a novel multi-objective possibilistic programming model is developed for considering the fuzzy return of the portfolio that can maximize mean return and upside risk and minimize the downside risk. Two different approaches are applied for converting the model to a single objective one. The performance of the proposed model was evaluated by using historical data introduced by Markowitz and data of Tehran Stock Exchange. The results show that the model is able to propose an appropriate portfolio for investors with optimizing the return and risk, simultaneously.