Financial data are often affected by uncertainty: imprecision, incompleteness etc. Therefore in a decision making problem, we should be able to process uncertain information. The uncertainty in the data may be treated by considering, rather than a single value, the interval of values in which the data may fall. Purpose of the present work is to extend the Markowitz’s portfolio selection model and the CAPM to the case in which the returns of any considered asset or the market portfolio are interval-valued variables. We aim at enforcing the power of decision of a classical decision-making method analyzing the interval of solutions when each quantity varies in its own interval of values. The algorithm of the introduced portfolio selection models have been developed and tested numerically when the returns of risky assets over time are described by real interval time series. The numerical results are well interpretable.

Portfolio selection models with interval data

GIOIA, Federica
2009

Abstract

Financial data are often affected by uncertainty: imprecision, incompleteness etc. Therefore in a decision making problem, we should be able to process uncertain information. The uncertainty in the data may be treated by considering, rather than a single value, the interval of values in which the data may fall. Purpose of the present work is to extend the Markowitz’s portfolio selection model and the CAPM to the case in which the returns of any considered asset or the market portfolio are interval-valued variables. We aim at enforcing the power of decision of a classical decision-making method analyzing the interval of solutions when each quantity varies in its own interval of values. The algorithm of the introduced portfolio selection models have been developed and tested numerically when the returns of risky assets over time are described by real interval time series. The numerical results are well interpretable.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11367/15959
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