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Portfolio Selection by Compromise Programming

In: Socially Responsible Investment

Author

Listed:
  • Enrique Ballestero

    (Universitat Politècnica de València)

  • David Pla-Santamaria

    (Universitat Politècnica de València)

  • Ana Garcia-Bernabeu

    (Universitat Politècnica de València)

  • Adolfo Hilario

    (Plaza Ferrándiz y Carbonell s/n)

Abstract

CP is a deterministic model like WGP in this aspect. Therefore, CP seems inappropriate to select stock portfolios from the Eu(R) maximization theory. In contrast to MV-SGP model, CP does not generalize Markowitz M-V model to multiple objectives. This lack of strictness is mitigated by the linkage between CP and utility theory established in Chap. 8. This linkage allows us to extend utility properties to CP approaches. We show the CP setting for portfolio selection by establishing and graphing its main elements: profitability-safety efficient frontier, ideal point and the bounds of Yu compromise set, which is the landing area on which the profitability-safety utility function reaches its maximum. From these variables, expected return and safety, the portfolio selection problem is defined in terms of CP.

Suggested Citation

  • Enrique Ballestero & David Pla-Santamaria & Ana Garcia-Bernabeu & Adolfo Hilario, 2015. "Portfolio Selection by Compromise Programming," International Series in Operations Research & Management Science, in: Enrique Ballestero & Blanca Pérez-Gladish & Ana Garcia-Bernabeu (ed.), Socially Responsible Investment, edition 127, chapter 0, pages 177-196, Springer.
    • Handle: RePEc:spr:isochp:978-3-319-11836-9_9
    DOI: 10.1007/978-3-319-11836-9_9
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    Cited by:

    1. Francisco Salas-Molina & Juan A. Rodríguez-Aguilar & David Pla-Santamaria, 2019. "Characterizing compromise solutions for investors with uncertain risk preferences," Operational Research, Springer, vol. 19(3), pages 661-677, September.

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