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

    Fernando García   Affiliation
    ; Jairo González-Bueno   Affiliation
    ; Javier Oliver   Affiliation
    ; Rima Tamošiūnienė   Affiliation

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.

Keyword : fuzzy portfolio selection, credibility theory, L-R power fuzzy numbers, mean-semi- variance-PER, evolutionary multiobjective optimization

How to Cite
García, F., González-Bueno, J., Oliver, J., & Tamošiūnienė, R. (2019). A credibilistic mean-semivariance-PER portfolio selection model for Latin America. Journal of Business Economics and Management, 20(2), 225-243. https://doi.org/10.3846/jbem.2019.8317
Published in Issue
Mar 7, 2019
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This work is licensed under a Creative Commons Attribution 4.0 International License.

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