Construction of Optimal Portfolio and Selection of Stock using Fuzzy Approach

Authors

  • Ity Patni

  • Nishu Gupta

How to Cite

Patni, I., & Gupta, N. (2018). Construction of Optimal Portfolio and Selection of Stock using Fuzzy Approach. International Journal of Engineering and Technology, 7(3.30), 118-121. https://doi.org/10.14419/ijet.v7i3.30.18214

Received date: August 25, 2018

Accepted date: August 25, 2018

Published date: August 24, 2018

DOI:

https://doi.org/10.14419/ijet.v7i3.30.18214

Keywords:

Optimal Portfolio, Sharpe-Single Index Mode, CAPM, Jenson’s Measure, Treynor’s Ratio & Sharpe Ratio

Abstract

Stock selection methods and strategies have been the prominent area of research since long. Portfolio theory is a connotation how an intelligent bias free investor should make an optimal portfolio. The line of the work is first inclined towards construction of optimal portfolio using Sharpe-Single Index model, CAPM, Jenson’s Measure, Treynor & Sharpe Ratio. These measures consider total risk i.e. systematic and unsystematic risk and suggests a rational investor in what proportion an investment can be made to a particular stock. Further, the purpose of the work is to combine the fuzzy approach for closer representation with reference to stock selection problem in a non-linear and uncertain environment. For demonstration, data set is taken from National Stock Exchange (NSE) for a period of 6 years (1st April, 2011 to 31st March, 2017). The proposed model will serve both ranking and assigning weight procedures to the selected stocks.

 

 

References

  1. [1] Patni I, Gupta DK (2015), Exploring the Behavioral Biases for Equity Investment: An Empirical Study on Active Investors of Jaipur City. Asian Journal of Management 6(3), 159-62.

    [2] Treynor JL. Jack Treynor's' Toward a Theory of Market Value of Risky Assets'.

    [3] Sharpe WF (1964), Capital asset prices: A theory of market equilibrium under conditions of risk. The journal of finance 19(3), 425-42.

    [4] Lintner J (1965), Security prices, risk, and maximal gains from diversification. The journal of finance 20(4):587-615.

    [5] Lintner J (1965), The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. The review of economics and statistics 13-37.

    [6] Mossin J (1966), Equilibrium in a capital asset market. Econometrica: Journal of the econometric society 768-83.f

    [7] Perold AF (2004), The capital asset pricing model. The Journal of Economic Perspectives 18(3), 3-24.

    [8] Braga MD (2016), The Traditional Approach to Asset Allocation. In Risk-Based Approaches to Asset Allocation, Springer International Publishing, pp. 3-15.

    [9] Gregová PG (2013), CAPM & Optimal Portfolio. The 7th International Days of Statistics and Economics, Prague.

    [10] Friend I, Blume M (1970), Measurement of portfolio performance under uncertainty. The American Economic Review 561-75.

    [11] Gitman, Lawrence J (1990), Fundamentals of Investing. Boston: Pearson Education.

    [12] Inuiguchi M, Ramık J (2000), Possibilistic linear programming: a brief review of fuzzy mathematical programming and a comparison with stochastic programming in portfolio selection problem. Fuzzy sets and systems 111(1), 3-28.

    [13] Inuiguchi M, Tanino T (2000), Portfolio selection under independent possibilistic information. Fuzzy sets and systems 115 (1), 83-92.

    [14] Tanaka H, Guo P, Türksen IB (2000), Portfolio selection based on fuzzy probabilities and possibility distributions. Fuzzy sets and systems 111(3), 387-97.

    [15] Parra MA, Terol AB, Urıa MR (2001), A fuzzy goal programming approach to portfolio selection. European Journal of Operational Research 133(2), 287-97.

    [16] Zadeh LA (1996), Fuzzy sets. InFuzzy Sets, Fuzzy Logic, and Fuzzy Systems: Selected Papers by Lotfi A Zadeh (pp. 394-432).

    [17] Smithson M (1982), Applications of fuzzy set concepts to behavioural sciences. Mathematical Social Sciences 2(3), 257-74.

    [18] Graham B (1965), The intelligent investor: A book of practical counsel. Prabhat Prakashan.

    [19] Tiryaki F, Ahlatcioglu B (2009), Fuzzy portfolio selection using fuzzy analytic hierarchy process. Information Sciences 179(1), 53-69.

    [20] Jefmański B (2014), Application of Rating Scale Model in Conversion of Rating Scales' Points To The Form Of Triangular Fuzzy Numbers. Folia Oeconomica Stetinensia 14(2), 7-18.

    [21] Patni, I., Choudhary, S., & Choubey, S. (2015). Analyzing the Robust Factors of Overconfidence Bias and its Impact: An Interpretive Structural Modeling Approach. Indian Journal of Research in Capital Markets, 2(3), 22-35.

Downloads

How to Cite

Patni, I., & Gupta, N. (2018). Construction of Optimal Portfolio and Selection of Stock using Fuzzy Approach. International Journal of Engineering and Technology, 7(3.30), 118-121. https://doi.org/10.14419/ijet.v7i3.30.18214

Received date: August 25, 2018

Accepted date: August 25, 2018

Published date: August 24, 2018