Fuzzy scenarios clustering-based approach with MV model in optimizing tactical allocation

  • Authors:

  • Hsing-Wen Wang

  • Affiliations:

  • Department of Business Administration, College of Management, National Changhua University of Education, Changhua County, Taiwan, R.O.C.

  • Venue:
  • SEAL'06 Proceedings of the 6th international conference on Simulated Evolution And Learning
  • Year:
  • 2006

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Abstract

A new interactive model for constructing a tactical global assets allocation through integrating fuzzy scenarios clustering- based approaches (FSCA) with mean-variance (MV) is proposed. This serves as an alternative forecasting rebalance quantitative model to the popular global assets allocation, in which the portfolio is first being observed in contrast with major asset and sub-assets classes which possess upward and downward positive co-movement phenomenon while considering the linkage of cross-market between different time-zones. In addition, fuzzy scenarios clustering would be induced into the MV model so as to adjust the weighting of the risk-return structural matrices. It could further enhance the efficient frontier of a portfolio as well as obtaining opportunity of excess return. By means of global major market indices as the empirical evidences, it shows that the new approach can provide a more efficient frontier for a portfolio and there would be less computational cost to solve MV model.