PORTFOLIO DECISION MODEL BASED ON FUZZY EXCESS RETURN

Abstract

Due to the existence of the uncertainty of risks and returns in China's financial securities market, we construct a portfolio model by applying different measuring method and considering restriction of various factors on investors in securities market. Based on the framework of traditional rational investors' portfolio theory, triangular fuzzy number is employed to characterize the excess return on securities. In our model, downside risk measured by measuring lower semi-deviation is used as the risk index to measure excess return，and coefficient of variation(CV) works as the standard to measure the quality of each stock in order to gain the optimal portfolio. At last, an empirical analysis of SSE 50 Index implies that our portfolio decision model based on fuzzy excess return has higher excess return compared with other traditional portfolio decision theory.