Abstract
•A multi-objective portfolio selection approach involving fuzzy parameters is introduced.•Subjectivity of human thought is considered by using fuzzy sets theory and satisfaction functions.•Allowing the investor to consider several conflicting and imprecise objectives simultaneously.•A reasonable manner for modelling explicitly the investor's preferences in portfolio selection.•Real application to financial portfolio selection within the Tunisian stock exchange market.
In the financial portfolio selection (FPS) problem, the investor usually considers several conflicting objectives such as return, risk, and liquidity. The values of these objectives are often provided by the investor who keeps inaccurate information and states his/her considerations subjectively. In order to deal with such a situation, we will propose a combined possibility theory and goal programming model (GP) allowing to consider tradeoffs between investor's preferences regarding several incommensurable objectives in an imprecise environment. The aim of this paper is to formulate a multi-objective FPS approach involving fuzzy parameters, where possibility distributions are given by fuzzy numbers from the information supplied by the decision-making environment (investor, analyst, financial market environment, etc.). Moreover, the investor's preferences will be explicitly incorporated through the concept of satisfaction functions. The proposed model is applied to FPS within the Tunisian stock exchange market and discussed in comparison with other portfolio selection procedures.