Interactive decision system in stochastic multiobjective portfolio selection

Abstract

Some investors pursuing a high return at the relatively high risk of losing a part of their money do not always select a preferred portfolio from among the so-called “mean-variance efficient frontier” provided by Markowitz (1959, Portfolio Selection, Wiley, New York). Chue and Nagasawa (1996, An investor-modeling and interactive method in multiobjective portfolio selection, Proceedings of the Pacific Conference on Manufacturing '96) constructed their own investor model based on an “ α-risk permission maximum return portfolio” and proposed an interactive portfolio selection system for selecting a preferred portfolio from the set of candidate portfolios. This paper extends the system to the case when the mean and the variance of return of securities have several scenarios with known occurrence probabilities.