Traditional techniques in portfolio management rely on the precise knowledge of the underlying probability distributions; in practice, however, such information is difficult to obtain because multiple factors affect stock prices on a daily basis and unexpected events might affect the price dynamics. To address this issue, we propose an approach to dynamic portfolio management based on the seque...

We derive optimal portfolio weights for an investor who has a strong belief on the distribution of the stock price at a future time. That distribution may be in disagreement with standard equilibrium pricing models, and the investor wants to take advantage of the perceived mispricing and attractive risk premium. We compute numerically optimal weights for models in which the investor believes th...

The question of optimal portfolio is addressed. The conventional Markowitz portfolio optimisation is discussed and the shortcomings due to non-Gaussian security returns are outlined. A method is proposed to minimise the likelihood of extreme non-Gaussian drawdowns of the portfolio value. The theory is called leptokurtic, because it minimises the effects from ”fat tails” of returns. The leptokur...

We provide a formal treatment of both static and dynamic portfolio choice using the Disappointment Aversion preferences of Gul (1991), which imply asymmetric aversion to gains versus losses. Our dynamic formulation nests the standard CRRA asset allocation problem as a special case. Using realistic data generating processes, we find reasonable equity portfolio allocations for disappointment aver...

This paper employs fuzzy set theory to solve the unintuitive problem of the Markowitz meanvariance MV portfolio model and extend it to a fuzzy investment portfolio selection model. Our model establishes intervals for expected returns and risk preference, which can take into account investors’ different investment appetite and thus can find the optimal resolution for each interval. In the empiri...

We examine the intertemporal optimal consumption and investment problem in a continuous-time economy with a divisible durable good. Consumption services are assumed to be proportional to the stock of the good held and adjustment of the stock is costly, in that it involves the payment of a proportional transaction cost. For the case in which the investor has an isoelastic utility function and as...

In the traditional portfolio model, investors calculate the expected return of assets and the covariance matrix for optimal asset allocation. This paper divides market sentiment period into three states and selectes the securities in the Chinese stock market to construct portfolios. We implement both the Fama-French five-factor model and the robust median covariance matrix approach for predicti...

This paper presents evidence of persistent ‘bull’ and ‘bear’ regimes in UK stock returns and considers their economic implications from the perspective of an investor’s portfolio decisions. We Þnd that the perceived state probability has a large effect on the optimal allocation to stocks, particularly at short investment horizons. If ignored, the presence of such regimes gives rise to welfare c...

recently, the economic crisis has resulted in instability in stock exchange market and this has caused high volatilities in stock value of exchanged firms. under these conditions, considering uncertainty for a favorite investment is more serious than before. multi-objective portfolio selection (return, liquidity, risk and initial cost of investment objectives) using minmax fuzzy goal programmin...

We investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of capital invested in stocks within an interval around an ideal optimal investment. The size of the holding interval is determined by the intensity of the transact...