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IAENG Transactions on Engineering Technologies

Volume 186 of the series Lecture Notes in Electrical Engineering pp 91-103

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Robust Portfolio Selection Model with Random Fuzzy Returns Based on Arbitrage Pricing Theory and Fuzzy Reasoning Method

  • Takashi HasuikeAffiliated withGraduate School of Information Science and Technology, Osaka University Email author 
  • , Hideki KatagiriAffiliated withGraduate School of Engineering, Hiroshima University
  • , Hiroshi TsudaAffiliated withDepartment of Mathematical Sciences, Faculty of Science and Engineering, Doshisha University

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Abstract

This paper considers a robust-based random fuzzy mean-variance portfolio selection problem using a fuzzy reasoning method, particularly a single input type fuzzy reasoning method. Arbitrage Pricing Theory (APT) is introduced as a future return of each security, and each factor in APT is assumed to be a random fuzzy variable whose mean is derived from a fuzzy reasoning method. Furthermore, under interval inputs of fuzzy reasoning method, a robust programming approach is introduced in order to minimize the worst case of the total variance. The proposed model is equivalently transformed into the deterministic nonlinear programming problem, and so the solution steps to obtain the exact optimal portfolio are developed.

Keywords

Portfolio selection problem Arbitrage pricing theory (APT) Random fuzzy programming Fuzzy reasoning method Robust programming Equivalent transformation Exact solution algorithm