Possibilistic mean-variance models and efficient frontiers for portfolio selection problem

  • Authors:

  • Wei-Guo Zhang;Ying-Luo Wang;Zhi-Ping Chen;Zan-Kan Nie

  • Affiliations:

  • School of Business Administration, South China University of Technology, Guangzhou, 510641, PR China and The School of Management, Xi'an Jiaotong University, Xi'an, Shaan'xi 710049, PR China;The School of Management, Xi'an Jiaotong University, Xi'an, Shaan'xi 710049, PR China;Faculty of Science, Xi'an Jiaotong University, Xi'an, Shaan'xi 710049, PR China;Faculty of Science, Xi'an Jiaotong University, Xi'an, Shaan'xi 710049, PR China

  • Venue:
  • Information Sciences: an International Journal
  • Year:
  • 2007

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Abstract

In this paper, it is assumed that the rates of return on assets can be expressed by possibility distributions rather than probability distributions. We propose two kinds of portfolio selection models based on lower and upper possibilistic means and possibilistic variances, respectively, and introduce the notions of lower and upper possibilistic efficient portfolios. We also present an algorithm which can derive the explicit expression of the possibilistic efficient frontier for the possibilistic mean-variance portfolio selection problem dealing with lower bounds on asset holdings.