Abstract
Traditional portfolio theory uses probability theory to analyze the uncertainty of financial market. The assets’ return in a portfolio is regarded as a random variable which follows a certain probability distribution. However, it is difficult to estimate the assets return in the real financial market, so the interval distribution of asset return can be estimated according to the relevant suggestions of experts and decision makers, that is, the interval number is used to describe the distribution of asset return. Therefore, this paper establishes a portfolio selection model based on the interval number. In this model, the semiabsolute deviation risk function is used to measure the portfolio’s risk, and the solution of the model is obtained by using the order relation of the interval number. At the same time, a satisfactory solution of the model is obtained by using the concept of acceptability of the interval number. Finally, an example is given to illustrate the practicability of the model.
Highlights
Portfolio selection refers to the way in which investors allocate a certain proportion of their wealth to a number of different assets so as to spread risks among multiple assets and obtain some stable returns
The covariance of all the securities in the portfolio was required, which was a considerable amount of calculation at that time, but difficult to achieve in practical application. erefore, later, scholars constantly proposed improved optimization methods and put forward new portfolio models (e.g., [2,3,4,5])
Mao [4] and Swalm [5] used the risk that the uncertain return is lower than the expected return to measure the investment risk and established the mean-semivariance portfolio selection model
Summary
Portfolio selection refers to the way in which investors allocate a certain proportion of their wealth to a number of different assets so as to spread risks among multiple assets and obtain some stable returns. Mao [4] and Swalm [5] used the risk that the uncertain return is lower than the expected return to measure the investment risk and established the mean-semivariance portfolio selection model. In 1991, Konno and Yamazaki [6] proposed the absolute deviation risk function and constructed a mean-absolute deviation portfolio optimization model. According to the concept of mean-absolute deviation function, a pair of two-level portfolio model was constructed, and the upper and lower bounds of investment returns in the portfolio selection problem were calculated. Based on the semiabsolute deviation risk function proposed by Mansini and Speranza [43], a mean-semiabsolute deviation portfolio selection model with respect to the interval number will be established.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
