Mean-Entropy Models for Fuzzy Portfolio Selection

This short paper proposes two types of credibility-based fuzzy mean-entropy models. In the short paper, entropy is used as the measure of risk. The smaller the entropy value is, the less uncertainty the portfolio return contains, and thus, the safer the portfolio is. Furthermore, as a measure of ris...

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Bibliographic Details
Published in:IEEE transactions on fuzzy systems 2008-08, Vol.16 (4), p.1096-1101
Main Author: Huang, Xiaoxia
Format: Article
Language:English
Subjects:
Algorithms
Data security
Distributed computing
Entropy
Environmental economics
Finance
Fuzzy
Fuzzy logic
fuzzy portfolio selection
fuzzy programming
Fuzzy set theory
Industrial economics
Information security
Mathematical models
mean-entropy model
Measurement uncertainty
Portfolios
Risk
Technology management
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Summary:This short paper proposes two types of credibility-based fuzzy mean-entropy models. In the short paper, entropy is used as the measure of risk. The smaller the entropy value is, the less uncertainty the portfolio return contains, and thus, the safer the portfolio is. Furthermore, as a measure of risk, entropy is free from reliance on symmetrical distributions of security returns and can be computed from nonmetric data. In addition, the short paper compares the fuzzy mean-variance model with the fuzzy mean-entropy model in two special cases and presents a hybrid intelligent algorithm for solving the proposed models in general cases. To illustrate the effectiveness of the proposed algorithm, the short paper also provides two numerical examples.
ISSN:1063-6706
1941-0034
DOI:10.1109/TFUZZ.2008.924200