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Bearing the bear: Sentiment-based disagreement in multi-criteria portfolio optimization

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  • S., Glogger
  • S., Heiden
  • D., Schneller

Abstract

Employing a nonlinear multi-criteria optimization approach, sentiment-based disagreement is incorporated into portfolio optimization as additional risk factor. A multi-criteria trading strategy outperforms several benchmarks regarding various performance measures. Applying the strategy over a long time period including downturns and upswings, disagreement proves itself especially valuable in bear markets as it is an indicator for future volatility.

Suggested Citation

  • S., Glogger & S., Heiden & D., Schneller, 2019. "Bearing the bear: Sentiment-based disagreement in multi-criteria portfolio optimization," Finance Research Letters, Elsevier, vol. 31(C), pages 47-53.
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:p:47-53
    DOI: 10.1016/j.frl.2019.04.017
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    1. Mugerman, Yevgeny & Yidov, Orr & Wiener, Zvi, 2020. "By the light of day: The effect of the switch to winter time on stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Portfolio optimization; Investor sentiment; Multi-criteria optimization; Sentiment-based disagreement;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General

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