Thursday, 25 February 2021 10:56

Cumulative Prospect Theory portfolio selection

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Barro D, Corazza M, Nardon M


Additional Info

  • Published in: WORKING PAPER (DEPARTMENT OF ECONOMICS, CÀ FOSCARI. UNIVERSITY OF VENICE - ISSN 1827-3580, vol. 26/2020, pp. 1-14
  • Year: 2020
  • 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.
Read 780 times Last modified on Thursday, 25 February 2021 15:14
Diana Barro

Associate professor - Ca’ Foscari University of Venice, Department of Economics