A novel fuzzy goal programming approach with preemtive structure for optimal investment decisions

Abstract

In this article, a novel portfolio selection model is proposed. This model is essentially based on the fuzzy goal programming with preemptive structure. In order to construct this model; the portfolio risk, the return levels and the beta coefficient introduced in the Capital Asset Pricing Model are considered as the fuzzy goals, and then a preemptive priority is defined among them. In accordance with the market moving trends, the different portfolio selection models are constituted for different types of investor behaviors. This model not only takes into account the different investor strategies with respect to the market moving trends, but provides also a reasonable diversification for a portfolio in terms of the risk - return tradeoff together with beta coefficient. In the application sections, the two different periods having the upward and the downward moving trends in the Istanbul Stock Exchange National 30 Index are handled separately, then the optimal portfolios are determined using the proposed portfolio selection model accordance with different investment strategies. Finally, the optimal portfolios are compared in terms of their return performances based on the selling prices in the test periods.