This paper presents a behavioral portfolio selection model with time discounting preference. Firstly, we discuss the portfolio selection problem and then modify this model based on cumulative prospect theory (CPT) as well as considering investors’ time discounting preference in psychology. Furthermore, an analytical solution with satisfying behavior is given for our proposed model, the results show that when investors’ goals are very ambitious, they put a high proportion of their wealth in long-term goals and adopt aggressive investment strategies with high leverage to reach short-term goals and the overall investment strategy also displays high leverage. Finally, numerical analysis is given and it is shown that investor who tends to future bias performs adequate confidence and patience whereas investor with present bias is apt to the immediate interests.
Mots-clés : Time discounting, portfolio choice, satisfying behavior, analytical solution
@article{RO_2018__52_3_691_0,
author = {Yang, Guang and Liu, Xinwang and Qin, Jindong and Khan, Ahmed},
title = {An analytical approach for behavioral portfolio model with time discounting preference},
journal = {RAIRO - Operations Research - Recherche Op\'erationnelle},
pages = {691--712},
publisher = {EDP-Sciences},
volume = {52},
number = {3},
year = {2018},
doi = {10.1051/ro/2017039},
mrnumber = {3868440},
zbl = {1419.91597},
language = {en},
url = {http://www.numdam.org/articles/10.1051/ro/2017039/}
}
TY - JOUR AU - Yang, Guang AU - Liu, Xinwang AU - Qin, Jindong AU - Khan, Ahmed TI - An analytical approach for behavioral portfolio model with time discounting preference JO - RAIRO - Operations Research - Recherche Opérationnelle PY - 2018 SP - 691 EP - 712 VL - 52 IS - 3 PB - EDP-Sciences UR - http://www.numdam.org/articles/10.1051/ro/2017039/ DO - 10.1051/ro/2017039 LA - en ID - RO_2018__52_3_691_0 ER -
%0 Journal Article %A Yang, Guang %A Liu, Xinwang %A Qin, Jindong %A Khan, Ahmed %T An analytical approach for behavioral portfolio model with time discounting preference %J RAIRO - Operations Research - Recherche Opérationnelle %D 2018 %P 691-712 %V 52 %N 3 %I EDP-Sciences %U http://www.numdam.org/articles/10.1051/ro/2017039/ %R 10.1051/ro/2017039 %G en %F RO_2018__52_3_691_0
Yang, Guang; Liu, Xinwang; Qin, Jindong; Khan, Ahmed. An analytical approach for behavioral portfolio model with time discounting preference. RAIRO - Operations Research - Recherche Opérationnelle, Tome 52 (2018) no. 3, pp. 691-712. doi : 10.1051/ro/2017039. http://www.numdam.org/articles/10.1051/ro/2017039/
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