Multi-objective portfolio selection with multi-stage stochastic programming

Subject Areas : Financial engineering

Hamed Asgari ¹ , javad Behnamian ²

1 - Department of Industrial Engineering, Bu_Ali Sina University, Hamedan, Iran.
2 - Department of Industrial Engineering, Bu Ali Sina University, Hamedan, Iran

Received: 2020-06-02 Accepted : 2020-08-04 Published : 2021-03-21

Keywords: Multi-Objective Optimization, Portfolio Selection, Multi-stochastic programming,

Abstract :

In this paper, a multi objective multi stage stochastic model is proposed to portfolio selection. This model takes into account both the investment goal and risk control at each stage. A scenario generation method is proposed that acts as the basis of the portfolio management model. Scenarios for multistage portfolio management are proposed that use by consumption that rate of returns are not correlated during stages. One of the most important aspects of this model is using transaction cost in model and providing this ability that investors could add or withdrawal cash during time. In the end some numerical example are illustrated and model effectiveness proved. As is presented using stochastic programming with recourse and combination of this model with scenario generation model provides this possibility for investors to plan their medium and short term investing. As can be seen result of the model proved effectiveness of the model in financial markets. As result presented having such tool that investor could adjust his or her portfolio during time according to targets such as maximizing rate of return and minimizing risk of his or her decisions could bring powerful superiority in competitive financial markets.