Abstract
This work discusses the frontiers of mean absolute deviation portfolios arising from the uncertainty of future rates of return. The risk of the overall portfolio is proposed as an objective function to attain a well-diversified portfolio with a predetermined target rate of return. The possible ranges of the target returns are suggested via the strong feasibility of the interval linear system of constraints. No short sales are allowed and a risk-averse investor is assumed to pursue the buy-and-hold strategy. The use of the method is illustrated with the historical returns of S&P 500 stocks, for which the negative correlation condition empirically holds, with a 6-month investment horizon from November 2018 to April 2019. The historical data is collected monthly over the past 4 years from November 2014 to October 2018.
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Chaiyakan, S., Thipwiwatpotjana, P. (2019). Mean Absolute Deviation Portfolio Frontiers with Interval-Valued Returns. In: Seki, H., Nguyen, C., Huynh, VN., Inuiguchi, M. (eds) Integrated Uncertainty in Knowledge Modelling and Decision Making. IUKM 2019. Lecture Notes in Computer Science(), vol 11471. Springer, Cham. https://doi.org/10.1007/978-3-030-14815-7_19
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DOI: https://doi.org/10.1007/978-3-030-14815-7_19
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