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Behavioral Aspects in Portfolio Selection

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Diana Barro

    (Ca’ Foscari University of Venice)

  • Marco Corazza

    (Ca’ Foscari University of Venice)

  • Martina Nardon

    (Ca’ Foscari University of Venice)

Abstract

We introduce elements of Cumulative Prospect Theory into the portfolio selection problem and then compare stock portfolios selected under the behavioral approach with those selected according to classical approaches, such as Mean Variance and Mean Absolute Deviation ones. The mathematical programming problem associated to the behavioral portfolio selection is highly non-linear and non-differentiable; for these reasons it is solved using a Particle Swarm Optimization approach. An application to the STOXX Europe 600 equity market is performed.

Suggested Citation

  • Diana Barro & Marco Corazza & Martina Nardon, 2021. "Behavioral Aspects in Portfolio Selection," Springer Books, in: Marco Corazza & Manfred Gilli & Cira Perna & Claudio Pizzi & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, pages 87-93, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-78965-7_14
    DOI: 10.1007/978-3-030-78965-7_14
    as

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