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A chance constrained recourse approach for the portfolio selection problem

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Abstract

This paper deals with the stochastic portfolio selection problem when the loss in the portfolio return is considered as a recourse cost. We suppose that the investor would penalize infeasible solutions for uncertain constraints with the most probable highest recourse cost rather than with the expected recourse cost as in the traditional recourse approach. This novel approach which is mixed with a goal programming approach is used to solve a multi-objective stochastic portfolio selection model. We illustrate the paper results by an empirical example using the weekly returns of the Standard & Poor’s 100 securities between January 2001 and November 2011.

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Authors and Affiliations

  1. College of Business Administration, University of Bahrain, P. O. Box 32038, Sakhir, Kingdom of Bahrain

    Meryem Masmoudi

  2. NEOMA Business School, Boulevard André Siegfried, 76130, Mont-Saint-Aignan, France

    Fouad Ben Abdelaziz

Authors
  1. Meryem Masmoudi
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  2. Fouad Ben Abdelaziz
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Correspondence to Meryem Masmoudi.

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Masmoudi, M., Ben Abdelaziz, F. A chance constrained recourse approach for the portfolio selection problem. Ann Oper Res 251, 243–254 (2017). https://doi.org/10.1007/s10479-015-1844-2

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  • DOI: https://doi.org/10.1007/s10479-015-1844-2

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