6533b7d7fe1ef96bd126827d

RESEARCH PRODUCT

Controlling risk through diversification in portfolio selection with non-historical information

Carlos IvorraClara CalvoVicente Liern

subject

MarketingDecision support system050208 financeActuarial scienceStrategy and Management05 social sciencesDiversification (finance)Management Science and Operations ResearchUpper and lower boundsManagement Information SystemsValue of information0502 economics and businessEconomicsPortfolio050207 economics

description

We deal with the portfolio selection problem for investors having information on the expected returns of the assets based not only on historical data. In the absence of a way of measuring the risk of non-historical information, the investor may try to adjust it through the consideration of a suitable set of diversification constraints. With this aim, we relate the concept of value of information (recently introduced by Kao and Steuer) to a qualitative subjective measure of the investor’s level of confidence in his/her non-historical information. As an illustration, we analyze the behavior of the proposed indicator in the Spanish IBEX35 index for risk, upper bound, semicontinuous variable and cardinality constraints.

yearjournalcountryeditionlanguage
2017-12-04Journal of the Operational Research Society
https://doi.org/10.1057/s41274-017-0195-6