Portfolio Selection Subject to Vague Experts' Judgments

Posted: 2 Apr 2006 Last revised: 7 Feb 2011

See all articles by K. Smimou

K. Smimou

University of Ontario Institute of Technology (UOIT) - Faculty of Business & IT

C. R. Bector

University of Manitoba

Gady Jacoby

College of Management Academic Studies; University of Manitoba - Department of Accounting and Finance; Seton Hall University

Date Written: March 1, 2006

Abstract

This paper is written with two purposes in mind. First, it brings together some recent results in the area of mean-variance theory model validation for fuzzy systems in the existence of subjective measures suggested by experts. The central idea of the methods presented here is to map random uncertainty given a portfolio-selection model into fuzzy random uncertainty description, which is useful from an application and analysis point of view. The main contributions of the paper are (i) to explore the implications of fuzzy return indeterminacy on mean-variance optimal portfolio choice and (ii) to use bid-ask spread as a proxy measure of the indeterminacy or fuzzy nature of random returns. Second, this paper also presents a brief self-contained glimpse of empirical representations to practitioners unfamiliar with the field of fuzzy modeling. It is hoped that expositions such as this one will open new collaborations between other branches of fuzzy mathematics and asset-pricing theories.

Keywords: Finance, Portfolio Selection, Fuzzy Theory, Mean-Variance Theory, Subjective Measures, Experts' judgments

JEL Classification: G11, G12, G15, C61

Suggested Citation

Smimou, Kamal and Bector, C. R. and Jacoby, Gady and Jacoby, Gady, Portfolio Selection Subject to Vague Experts' Judgments (March 1, 2006). International Review of Financial Analysis, Vol. 17, No. 5, 2008, Available at SSRN: https://ssrn.com/abstract=892040

Kamal Smimou (Contact Author)

University of Ontario Institute of Technology (UOIT) - Faculty of Business & IT ( email )

2000 Simcoe Street North
Oshawa, Ontario L1H 7K4
Canada

C. R. Bector

University of Manitoba ( email )

Winnipeg, Manitoba R3T 5V4
Canada

Gady Jacoby

College of Management Academic Studies ( email )

Elie Wiesel St 2
Rishon LeTsiyon
Israel

Seton Hall University ( email )

400 S Orange Avenue
South Orange, NJ 07079
United States

University of Manitoba - Department of Accounting and Finance

Faculty of Management
Winnipeg, MB R3T 5V4
Canada

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