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Journal of Applied Sciences

Year: 2013 | Volume: 13 | Issue: 20 | Page No.: 4162-4165
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Research Article

Entropy Model for Portfolio Selection with Fuzzy Returns

Li Shi-Hang
School of Management, Shandong Normal University, Jinan, Shandong, 250014, China

ABSTRACT

This study considers an entropy model for portfolio selection with fuzzy returns. Due to lack of historical data and the uncertainty of return on investment, investors suffer big risks during the investment. It is particularly important for investors to get a lot of expected return without getting a lot of risk. In this study, through comparing with variance, fuzzy entropy is introduced as a risk measure and a fuzzy entropy based portfolio model is proposed. The expected return rate and risk level in this model can be easily modified according to the decision maker, thus the model has more agility. Then hybrid optimization algorithm based on fuzzy simulation is proposed to solve the model that the rate of return on investment is random fuzzy variable, thus greatly improves utility of the model. To illustrate the effectiveness of the proposed algorithm, one example is presented. Examples analyses have confirmed the feasibility of the algorithm above.
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REFERENCES

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