A multiobjective interval portfolio framework for supporting investor's preferences under different risk assumptions

This paper is aimed at presenting a multiobjective interval portfolio framework which considers investment decisions under different risk assumptions. New surrogate problems are obtained for the mean-absolute deviation risk measure based on the concept of necessary subtraction between interval numbe...

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Bibliographic Details
Published in:The Journal of the Operational Research Society 2019-10, Vol.70 (10), p.1639-1661
Main Authors: Henriques, Carla Oliveira, Neves, Maria Elisabete Duarte
Format: Article
Language:English
Subjects:
mean-absolute deviation-risk models
multiobjective interval linear portfolio problems
Portfolio theory
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Summary:This paper is aimed at presenting a multiobjective interval portfolio framework which considers investment decisions under different risk assumptions. New surrogate problems are obtained for the mean-absolute deviation risk measure based on the concept of necessary subtraction between interval numbers. A proposal for obtaining the efficient portfolio solutions is also suggested, which allows accounting for three types of investment strategies. Indices of robustness have also been computed, which allow assessing the assets which are more often selected irrespective of the investment strategy followed, and regardless of the business cycle contemplated. Results illustrate the trade-off between risk and return, being also consistent with the type of strategy followed by the investor. Overall, we were able to conclude that less prone to risk investors might find the formulation based on the mean-absolute necessary deviation more appealing since it allows reaching, in general, lower volatility of returns.
ISSN:0160-5682
1476-9360
DOI:10.1080/01605682.2019.1571004