A risk index model for multi-period uncertain portfolio selection

This paper discusses a multi-period portfolio selection problem when security returns are given by experts' evaluations. The security return rates are regarded as uncertain variables and an uncertain risk index adjustment model is proposed. Optimal portfolio adjustments are determined with the objective of maximizing the total incremental wealth within the constraints of controlling the cumulative risk index value over the investment horizon and satisfying self-financing at each period. To enable the users to solve the model problem with currently available programming tools, an equivalent of the model is provided. In addition, a method of obtaining the uncertainty distributions of the security returns is given based on experts' evaluations, and a selection example is presented. (C) 2012 Elsevier Inc. All rights reserved.