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Multi-period Possibilistic Mean Semivariance Portfolio Selection with Cardinality Constraints and its Algorithm

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Journal of Mathematical Modelling and Algorithms in Operations Research

Abstract

In this paper, we consider a multi-period portfolio selection problem in a fuzzy investment environment, in which the return and risk of assets are characterized by possibilistic mean value and possibilistic semivariance, respectively. Based on the theories of possibility, a new multi-period possibislistic portfolio selection model is proposed, which contains risk control, transaction costs, borrowing constraints, threshold constraints and cardinality constraints. the proposed model can be transformed into a crisp nonlinear dynamic optimization problem by using fuzzy programming approach. Because of the transaction costs and cardinality constraints, the multi-period portfolio selection is a mix integer dynamic optimization problem with path dependence A forward dynamic programming method is designed to obtain the optimal portfolio strategy. Finally, a comparison analysis of the different cardinality constraints is provided to illustrate the efficiency of the proposed approaches and the designed algorithm.

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  1. School of Management, Wuhan University of Science and Technology, Wuhan, 430081, Peoples Republic of China

    Peng Zhang

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Zhang, P. Multi-period Possibilistic Mean Semivariance Portfolio Selection with Cardinality Constraints and its Algorithm. J Math Model Algor 14, 239–253 (2015). https://doi.org/10.1007/s10852-014-9268-6

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  • DOI: https://doi.org/10.1007/s10852-014-9268-6

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