Multiobjective Programming and Multiattribute Utility Functions in Portfolio Optimization

Ehrgott, Matthias and Waters, Chris and Kasimbeyli, Refail and Ustun, Ozden (2009) Multiobjective Programming and Multiattribute Utility Functions in Portfolio Optimization. Information Systems and Operational Research, 47 (1). pp. 31-42. ISSN 0315-5986

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Abstract

In recent years portfolio optimization models that consider more criteria than the expected return and variance objectives of the Markowitz model have become popular. These models are harder to solve than the quadratic mean-variance problem. Two approaches to find a suitable portfolio for an investor are possible. In the multiattribute utility theory (MAUT) approach a utility function is constructed based on the investor's preferences and an optimization problem is solved to find a portfolio that maximizes the utility function. In the multiobjective programming (MOP) approach a set of efficient portfolios is computed by optimizing a scalarized objective function. The investor then chooses a portfolio from the efficient set according to his/her preferences. We outline these two approaches using the UTADIS method to construct a utility function and present numerical results for an example

Item Type: Journal Article
Journal or Publication Title: Information Systems and Operational Research
Uncontrolled Keywords: /dk/atira/pure/subjectarea/asjc/1700/1706
Subjects:
Departments: Lancaster University Management School > Management Science
ID Code: 64481
Deposited By: ep_importer_pure
Deposited On: 14 May 2013 08:34
Refereed?: Yes
Published?: Published
Last Modified: 29 Jan 2020 07:36
URI: https://eprints.lancs.ac.uk/id/eprint/64481

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