IDEAS home Printed from https://ideas.repec.org/a/lde/journl/y2022i97p369-393.html
   My bibliography  Save this article

Optimal Portfolio Selection Using the Black-Litterman Model With Fuzzy Views

Author

Listed:
  • Yuly Andrea Franco Gómez

    (Universitaria Uniagustiniana)

  • John Freddy Moreno Trujillo

    (Universidad Externado de Colombia)

  • Carlos Andres Zapata Quimbayo

    (Universidad Externado de Colombia)

Abstract

In this article, a robust approach to the optimal selection portfolio is implemented by incorporating the advances of the Black-Litterman (BL) model and fuzzy logic. To do that, the expected returns, the investor’s opinions (views) and the uncertainty matrix of the BL model are redefined using fuzzy logic and an optimization exercise is implemented for a portfolio of shares in the Colombian stock market. The results show an appropriate performance (out-sample) from the portfolio, in comparison with the traditional BL model and the mean-variance (MV) model, which shows that the fuzzy logic approach allows incorporating additional information to define the views and measure the uncertainty.

Suggested Citation

  • Yuly Andrea Franco Gómez & John Freddy Moreno Trujillo & Carlos Andres Zapata Quimbayo, 2022. "Optimal Portfolio Selection Using the Black-Litterman Model With Fuzzy Views," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 97, pages 369-393, July-Dece.
    • Handle: RePEc:lde:journl:y:2022:i:97:p:369-393
    DOI: 10.17533/udea.le.n97a346171
    as

    Download full text from publisher

    File URL: https://revistas.udea.edu.co/index.php/lecturasdeeconomia/article/view/346171
    Download Restriction: no
    File URL: https://libkey.io/10.17533/udea.le.n97a346171?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. R. E. Bellman & L. A. Zadeh, 1970. "Decision-Making in a Fuzzy Environment," Management Science, INFORMS, vol. 17(4), pages 141-164, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vuciterna, Rina & Thomsen, Michael & Popp, Jennie & Musliu, Arben, 2017. "Efficiency and Competitiveness of Kosovo Raspberry Producers," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252770, Southern Agricultural Economics Association.
    2. Gourav Gupta & Shivani & Deepika Rani, 2024. "Neutrosophic goal programming approach for multi-objective fixed-charge transportation problem with neutrosophic parameters," OPSEARCH, Springer;Operational Research Society of India, vol. 61(3), pages 1274-1300, September.
    3. Berna Tektas Sivrikaya & Ferhan Cebi & Hasan Hüseyin Turan & Nihat Kasap & Dursun Delen, 2017. "A fuzzy long-term investment planning model for a GenCo in a hybrid electricity market considering climate change impacts," Information Systems Frontiers, Springer, vol. 19(5), pages 975-991, October.
    4. Collan, Mikael, 2008. "New Method for Real Option Valuation Using Fuzzy Numbers," Working Papers 466, IAMSR, Åbo Akademi.
    5. Kim, Jong Soon & Whang, Kyu-Seung, 1998. "A tolerance approach to the fuzzy goal programming problems with unbalanced triangular membership function," European Journal of Operational Research, Elsevier, vol. 107(3), pages 614-624, June.
    6. Berna Tektaş & Hasan Hüseyin Turan & Nihat Kasap & Ferhan Çebi & Dursun Delen, 2022. "A Fuzzy Prescriptive Analytics Approach to Power Generation Capacity Planning," Energies, MDPI, vol. 15(9), pages 1-26, April.
    7. Chen, Lisa Y. & Wang, Tien-Chin, 2009. "Optimizing partners' choice in IS/IT outsourcing projects: The strategic decision of fuzzy VIKOR," International Journal of Production Economics, Elsevier, vol. 120(1), pages 233-242, July.
    8. Víctor G. Alfaro-García & Anna M. Gil-Lafuente & Gerardo G. Alfaro Calderón, 2017. "A fuzzy approach to a municipality grouping model towards creation of synergies," Computational and Mathematical Organization Theory, Springer, vol. 23(3), pages 391-408, September.
    9. Aghayi, Nazila & Maleki, Bentolhoda, 2016. "Efficiency measurement of DMUs with undesirable outputs under uncertainty based on the directional distance function: Application on bank industry," Energy, Elsevier, vol. 112(C), pages 376-387.
    10. Wenyao Niu & Yuan Rong & Liying Yu & Lu Huang, 2022. "A Novel Hybrid Group Decision Making Approach Based on EDAS and Regret Theory under a Fermatean Cubic Fuzzy Environment," Mathematics, MDPI, vol. 10(17), pages 1-30, August.
    11. de Andres-Sanchez, Jorge, 2007. "Claim reserving with fuzzy regression and Taylor's geometric separation method," Insurance: Mathematics and Economics, Elsevier, vol. 40(1), pages 145-163, January.
    12. Mikhailov, L., 2004. "A fuzzy approach to deriving priorities from interval pairwise comparison judgements," European Journal of Operational Research, Elsevier, vol. 159(3), pages 687-704, December.
    13. Hongyi Sun & Bingqian Zhang & Wenbin Ni, 2022. "A Hybrid Model Based on SEM and Fuzzy TOPSIS for Supplier Selection," Mathematics, MDPI, vol. 10(19), pages 1-19, September.
    14. Liu, Yong-Jun & Zhang, Wei-Guo, 2015. "A multi-period fuzzy portfolio optimization model with minimum transaction lots," European Journal of Operational Research, Elsevier, vol. 242(3), pages 933-941.
    15. Sakawa, Masatoshi & Kato, Kosuke, 1998. "An interactive fuzzy satisficing method for structured multiobjective linear fractional programs with fuzzy numbers," European Journal of Operational Research, Elsevier, vol. 107(3), pages 575-589, June.
    16. Sajid Ali & Sang-Moon Lee & Choon-Man Jang, 2017. "Determination of the Most Optimal On-Shore Wind Farm Site Location Using a GIS-MCDM Methodology: Evaluating the Case of South Korea," Energies, MDPI, vol. 10(12), pages 1-22, December.
    17. David Opresnik & Maurizio Fiasché & Marco Taisch & Manuel Hirsch, 0. "An evolving fuzzy inference system for extraction of rule set for planning a product–service strategy," Information Technology and Management, Springer, vol. 0, pages 1-17.
    18. Bogdana Stanojević & Milan Stanojević & Sorin Nădăban, 2021. "Reinstatement of the Extension Principle in Approaching Mathematical Programming with Fuzzy Numbers," Mathematics, MDPI, vol. 9(11), pages 1-16, June.
    19. Svajone Bekesiene & Serhii Mashchenko, 2023. "On Nash Equilibria in a Finite Game for Fuzzy Sets of Strategies," Mathematics, MDPI, vol. 11(22), pages 1-12, November.
    20. V. Alpagut Yavuz, 2016. "An Analysis of Job Change Decision Using a Hybrid Mcdm Method: A Comparative Analysis," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 6(3), pages 60-75, March.

    More about this item

    Keywords

    optimal portfolio; Black-Litterman model; fuzzy logic.;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lde:journl:y:2022:i:97:p:369-393. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Carlos Andrés Vasco Correa (email available below). General contact details of provider: https://edirc.repec.org/data/deantco.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.