Fuzziness and funds allocation in portfolio optimization
Author(s)
Khoshnevisan, Mohammad
Bhattacharya, Sukanto
Smarandache, Florentin
Griffith University Author(s)
Year published
2003
Metadata
Show full item recordAbstract
Each individual investor is different, with different financial goals, levels of risk tolerance and personal preferences. From the point of view of investment management, these characteristics are often defined as objectives and constraints. Objectives can be the type of return being sought, while constraints include factors such as time horizon, how liquid the investor is, any personal tax situation and how risk is handled. It is really a balancing act between risk and return with each investor having unique requirements, as well as a unique financial outlook - essentially a constrained utility maximization objective. ...
View more >Each individual investor is different, with different financial goals, levels of risk tolerance and personal preferences. From the point of view of investment management, these characteristics are often defined as objectives and constraints. Objectives can be the type of return being sought, while constraints include factors such as time horizon, how liquid the investor is, any personal tax situation and how risk is handled. It is really a balancing act between risk and return with each investor having unique requirements, as well as a unique financial outlook - essentially a constrained utility maximization objective. To analyze how well a customer fits into a particular investor class, one investment house has even designed a structured questionnaire with about 24 questions that each has to be answered with values from 1 to 5. The questions range from personal background to what the customer expects from an investment. A fuzzy logic system has been designed for the evaluation of the answers to the above questions. The notion of fuzziness with respect to funds allocation is investigated.
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View more >Each individual investor is different, with different financial goals, levels of risk tolerance and personal preferences. From the point of view of investment management, these characteristics are often defined as objectives and constraints. Objectives can be the type of return being sought, while constraints include factors such as time horizon, how liquid the investor is, any personal tax situation and how risk is handled. It is really a balancing act between risk and return with each investor having unique requirements, as well as a unique financial outlook - essentially a constrained utility maximization objective. To analyze how well a customer fits into a particular investor class, one investment house has even designed a structured questionnaire with about 24 questions that each has to be answered with values from 1 to 5. The questions range from personal background to what the customer expects from an investment. A fuzzy logic system has been designed for the evaluation of the answers to the above questions. The notion of fuzziness with respect to funds allocation is investigated.
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Journal Title
International Journal of Social Economics
Volume
30
Issue
5
Subject
Investment and Risk Management
Applied Economics
Other Economics