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Article
Lexicographic goal programming approach for portfolio optimization
1st Operation research conference, Kish, Iran (2008)
  • Mehdi Jafarian
  • Azizolah Jafari
Abstract

The mean variance model of portfolio optimization that was introduced by Markowitz includes two conflicted objective functions. These two criteria, risk and return does not encompass all of the information about investment. Information like liquidity, annual dividends and performance in later years. Thus portfolio selection is a usual multi-objective decision making (MODM) problem. This paper will investigate the optimum portfolio for a private investor, taking into account 6 criteria. It is well known that GP, based on preemptive priorities and target values, has been successful in solving MODM problems. In this paper we classify the MODM model with consideration of conflict between objective functions. And this is because of the fact that Decision maker (DM) does not have enough information about the trade-off between objective functions. Then we solve this model which was constructed by prioritizing objectives, with Lexicographic Goal Programming (LGP). Finally we determine the goals, and illustrate our proposed LGP model by an example.

Keywords
  • Lexicographic Goal Programming (LGP),
  • portfolio optimization,
  • multi- objective decision making (MODM),
  • priority,
  • decision maker (DM)
Publication Date
2008
Citation Information
Mehdi Jafarian and Azizolah Jafari. "Lexicographic goal programming approach for portfolio optimization" 1st Operation research conference, Kish, Iran (2008)
Available at: http://works.bepress.com/jafarian/9/