TítuloCharacterizing compromise solutions for investors with uncertain risk preferences
Publication TypeJournal Article
Year of Publication2017
AuthorsSalas-Molina F, Rodríguez-Aguilar JA, Pla-Santamaria D
JournalOperational Research: An International Journal
Palabras clavecompromise programming, discrete efficient-frontiers, Finance, performance prediction, portfolio selection

The optimum portfolio selection for an investor with particular preferences was proven to lie on the normalized efficient frontier between two bounds defined by the Ballestero (1998) bounding theorem. A deeper under- standing is possible if the decision-maker is provided with visual and quantita- tive techniques. Here, we derive useful insights as a way to support investor’s decision-making through: (i) a new theorem to assess balance of solutions; (ii) a procedure and a new plot to deal with discrete efficient frontiers and uncer- tain risk preferences; and (iii) two quality metrics useful to predict long-run performance of investors.