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Journal of Global Optimization

, Volume 57, Issue 2, pp 299–314 | Cite as

A stochastic programming approach to multicriteria portfolio optimization

  • Ceren Tuncer Şakar
  • Murat Köksalan
Article

Abstract

We study a stochastic programming approach to multicriteria multi-period portfolio optimization problem. We use a Single Index Model to estimate the returns of stocks from a market-representative index and a random walk model to generate scenarios on the possible values of the index return. We consider expected return, Conditional Value at Risk and liquidity as our criteria. With stocks from Istanbul Stock Exchange, we make computational studies for the two and three-criteria cases. We demonstrate the tradeoffs between criteria and show that treating these criteria simultaneously yields meaningful efficient solutions. We provide insights based on our experiments.

Keywords

Portfolio optimization Stochastic programming Market efficiency Multicriteria Liquidity Conditional value at risk 

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.Industrial Engineering DepartmentMiddle East Technical UniversityAnkaraTurkey

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