Geodesic
An analytical approach for behavioral portfolio model with time discounting preference
RAIRO - Operations Research - Recherche Opérationnelle, Tome 52 (2018) no. 3, pp. 691-712

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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.

DOI : 10.1051/ro/2017039
Classification : 91B28, 91G10, 97M30
Keywords: Time discounting, portfolio choice, satisfying behavior, analytical solution

Yang, Guang 1 ; Liu, Xinwang 1 ; Qin, Jindong 1 ; Khan, Ahmed 1

1 
@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://geodesic.mathdoc.fr/articles/10.1051/ro/2017039/}
}
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AU  - Khan, Ahmed
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PB  - EDP-Sciences
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%A Khan, Ahmed
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%D 2018
%P 691-712
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%I EDP-Sciences
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%R 10.1051/ro/2017039
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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

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