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Multi-objective portfolio selection considering expected and total utility

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Listed:
  • Wang, Xianhe
  • Ouyang, Yuliang
  • Li, You
  • Liu, Shu
  • Teng, Long
  • Wang, Bo

Abstract

To address the challenge of risk minimization associated with investors’ irrational investment decisions in the face of wealth fluctuations, this article integrates prospect theory and disappointment theory into the framework of multi-objective portfolio selection. By concurrently incorporating prospect theory and disappointment theory, this conceptual framework not only considers emotional factors but also offers a comprehensive depiction of individuals’ decision-making processes amidst uncertainty. The proposed portfolio selection model aims to balance return and risk by maximizing both expected and total utility. The effectiveness of the proposed model is validated through comparisons with three other methods.

Suggested Citation

  • Wang, Xianhe & Ouyang, Yuliang & Li, You & Liu, Shu & Teng, Long & Wang, Bo, 2023. "Multi-objective portfolio selection considering expected and total utility," Finance Research Letters, Elsevier, vol. 58(PD).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323009248
    DOI: 10.1016/j.frl.2023.104552
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    Cited by:

    1. Silva, Natan Felipe & de Andrade, Lélis Pedro & da Silva, Washington Santos & de Melo, Maísa Kely & Tonelli, Adriano Olímpio, 2024. "Portfolio optimization based on the pre-selection of stocks by the Support Vector Machine model," Finance Research Letters, Elsevier, vol. 61(C).

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    More about this item

    Keywords

    Fuzzy portfolio selection; Expected utility; Prospect theory; Disappointment theory;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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