Decision-making of portfolio investment with linear plus double exponential utility function

Qingjian Zhou; Jia Jiao; Datian Niu; Deli Yang

RAIRO - Operations Research - Recherche Opérationnelle (2013)

  • Volume: 47, Issue: 4, page 361-370
  • ISSN: 0399-0559

Abstract

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This paper broadens the exponential utility function commonly used by risk-averse investors to the linear plus double exponential utility function, which is applicable in most cases. Thus it is of essential and supreme significance to conduct a research on its optimal investment portfolio in securities investment. This paper, by means of the non-difference curve method, carries out a research into the optimal portfolio decision-making by investors who have this type of utility function. The optimal decision-making and the ratio of optimal portfolio investment are derived. Finally, an actual case is given to verify the relevant results.

How to cite

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Zhou, Qingjian, et al. "Decision-making of portfolio investment with linear plus double exponential utility function." RAIRO - Operations Research - Recherche Opérationnelle 47.4 (2013): 361-370. <http://eudml.org/doc/275049>.

@article{Zhou2013,
abstract = {This paper broadens the exponential utility function commonly used by risk-averse investors to the linear plus double exponential utility function, which is applicable in most cases. Thus it is of essential and supreme significance to conduct a research on its optimal investment portfolio in securities investment. This paper, by means of the non-difference curve method, carries out a research into the optimal portfolio decision-making by investors who have this type of utility function. The optimal decision-making and the ratio of optimal portfolio investment are derived. Finally, an actual case is given to verify the relevant results.},
author = {Zhou, Qingjian, Jiao, Jia, Niu, Datian, Yang, Deli},
journal = {RAIRO - Operations Research - Recherche Opérationnelle},
keywords = {linear plus double exponential utility function; optimal portfolio; investment decision-making; non-difference curve method},
language = {eng},
number = {4},
pages = {361-370},
publisher = {EDP-Sciences},
title = {Decision-making of portfolio investment with linear plus double exponential utility function},
url = {http://eudml.org/doc/275049},
volume = {47},
year = {2013},
}

TY - JOUR
AU - Zhou, Qingjian
AU - Jiao, Jia
AU - Niu, Datian
AU - Yang, Deli
TI - Decision-making of portfolio investment with linear plus double exponential utility function
JO - RAIRO - Operations Research - Recherche Opérationnelle
PY - 2013
PB - EDP-Sciences
VL - 47
IS - 4
SP - 361
EP - 370
AB - This paper broadens the exponential utility function commonly used by risk-averse investors to the linear plus double exponential utility function, which is applicable in most cases. Thus it is of essential and supreme significance to conduct a research on its optimal investment portfolio in securities investment. This paper, by means of the non-difference curve method, carries out a research into the optimal portfolio decision-making by investors who have this type of utility function. The optimal decision-making and the ratio of optimal portfolio investment are derived. Finally, an actual case is given to verify the relevant results.
LA - eng
KW - linear plus double exponential utility function; optimal portfolio; investment decision-making; non-difference curve method
UR - http://eudml.org/doc/275049
ER -

References

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  1. [1] X.H. He and Y. Chen, Utility Function and Economic Agent: An Insight from Financial Economics. The Theory and Practice of Finance and Economics155 (2008) 1–7. 
  2. [2] H. Markowitiz, Portfolio selection. J. Finance7 (1952) 77–91. 
  3. [3] Operational Research, Tsinghua University Press, Beijing (2005). 
  4. [4] W.F. Sharpe, G.J. Alexander and J.V. Bailey, Investments, 6th edn. Prentice-Hall International inc. New Jersey (1999). 
  5. [5] Z.X. Ye and J.Z. Lin, Mathematic FinanceAsset Pricing and Finance Decision-making Theory. Science Press, Beijing (1998). 
  6. [6] Y.T. Zhang, Statistic Analysis of Finance market, Guangxi Normal University Press, Guilin (1998). 
  7. [7] Q.J. Zhou, S.Y. Lv and J. Jiao, Decision-making of portfolio investment with double exponential utility function. J. Dalian University of Technology51 (2011) 766–770. Zbl1265.91155MR2896571
  8. [8] Q.J. Zhou and K.Y. Zhang, Research on Portfolio Investment with Linear plus Exponential Utility Function. Appl. Math.17 (2004) 53–58. 
  9. [9] Q.J. Zhou and J.M. Wu, Two Methods of Optinal Portfolio Investment with Negative Exponential Utility Function and their Consistency. J. Dalian Nationalities University6 (2004) 7–10. 

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