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Behavioral Aspects in Portfolio Selection

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Mathematical and Statistical Methods for Actuarial Sciences and Finance

Abstract

We introduce elements of Cumulative Prospect Theory into the portfolio selection problem and then compare stock portfolios selected under the behavioral approach with those selected according to classical approaches, such as Mean Variance and Mean Absolute Deviation ones. The mathematical programming problem associated to the behavioral portfolio selection is highly non-linear and non-differentiable; for these reasons it is solved using a Particle Swarm Optimization approach. An application to the STOXX Europe 600 equity market is performed.

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References

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Authors and Affiliations

  1. Department of Economics, Ca’ Foscari University of Venice, Sestiere Cannaregio 873, 30121, Venezia, Italy

    Diana Barro, Marco Corazza & Martina Nardon

Authors
  1. Diana Barro
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  2. Marco Corazza
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  3. Martina Nardon
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Corresponding author

Correspondence to Martina Nardon .

Editor information

Editors and Affiliations

  1. Department of Economics, Ca' Foscari University of Venice, Venezia, Italy

    Marco Corazza

  2. Geneva School of Economics and Management (GSEM), University of Geneva, Genève, Switzerland

    Manfred Gilli

  3. Department of Economics and Statistics, University of Salerno, Fisciano, Italy

    Cira Perna

  4. Department of Economics, Ca' Foscari University of Venice, Venezia, Italy

    Claudio Pizzi

  5. Department of Economics and Statistics, University of Salerno, Fisciano, Italy

    Marilena Sibillo

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Barro, D., Corazza, M., Nardon, M. (2021). Behavioral Aspects in Portfolio Selection. In: Corazza, M., Gilli, M., Perna, C., Pizzi, C., Sibillo, M. (eds) Mathematical and Statistical Methods for Actuarial Sciences and Finance. Springer, Cham. https://doi.org/10.1007/978-3-030-78965-7_14

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