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- Title
ROBUST OPTIMIZATION IN PORTFOLIO SELECTION BY m-MAD MODEL APPROACH.
- Authors
GHAHTARANI, Alireza; NAJAFI, Amir Abbas
- Abstract
The portfolio selection problem is one of the main investment management problems. In the portfolio selection problem, robustness is sought against uncertainty or variability in the value of the parameters of the problem. In this paper, an extended mean absolute deviation model named the m-MAD model is applied to construct a new robust portfolio selection model that is solvable to real-world problems. The m-MAD model is a linear programming model and allows us to measure risk using downside deviations with the ability to penalize larger downside deviations. It also has a better performance of risk-averse priorities. The results of the performance analysis of the model show that the solutions of the m-MAD model are compatible with respect to second-degree stochastic dominance.
- Subjects
INVESTMENT management; ROBUST optimization; ECONOMIC models; STANDARD deviations; FINANCIAL risk management
- Publication
Economic Computation & Economic Cybernetics Studies & Research, 2018, Vol 52, Issue 1, p279
- ISSN
0424-267X
- Publication type
Article
- DOI
10.24818/18423264/52.1.18.17