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South African Journal of Industrial Engineering

On-line version ISSN 1012-277X

S. Afr. J. Ind. Eng. vol.22 n.1 Pretoria  2011

 

Developing a modular portfolio selection model for short-term and long-term market trends and mass psychology

 

 

M. JasemiI; A.M. KimiagariII

IDepartment of Industrial Engineering, Islamic Azad University, Masjed Soleyman Branch, Masjed Soleyman, Iran. miladj@aut.ac.ir
IIDepartment of Industrial Engineering, Amirkabir University of Technology, Tehran, Iran. kimiagar@aut.ac.ir

 

 


ABSTRACT

In an effort to model stock markets, many researchers have developed portfolio selection models to maximise investor satisfaction. However, this field still needs more accurate and comprehensive models. Development of these models is difficult because of unpredictable economic, social, and political variables that affect stock market behaviour. In this paper, a new model with three modules for portfolio optimisation is presented. The first module derives the efficient frontier through a new approach; the second presents an intelligent mechanism for emitting trading signals; while the third module integrates the outputs of the first two modules. Some important features of the model in comparison with others are: 1) consideration of investors' emotions - the psychology of the market - that arises from the three above-mentioned factors; 2) significant loosening of simplifying assumptions about markets and stocks; and 3) greater sensitivity to new data.


OPSOMMING

In 'n poging om aandelemarkte te modelleer het verskeie navorsers portefeulje-seleksie-modelle ontwikkel om beleggers se tevredenheid te maksimiseer. Desnieteenstaande word meer akkurate en omvattende modelle benodig. Die ontwikkeling van hierdie modelle word bemoeilik deur die onvoorspelbare ekonomiese, sosiale en politiese veranderlikes wat aandelemarkte se gedrag raak. In hierdie artikel word 'n nuwe model voorgehou wat bestaan uit drie modules vir portefeulje-optimisering. Die eerste module bepaal die doelmatigheidsgrens op 'n nuwe metode; die tweede hou 'n intelligente meganisme voor om transaksieseine te lewer terwyl die derde module die uitsette van die eerste twee modules integreer. Sommige van die belangrike eienskappe van die model wat dit van ander onderskei is: 1) konsiderasie van die beleggers se emosies - die sielkunde van die mark - wat ontstaan vanweë die genoemde faktore; 2) betekenisvolle verslapping van die vereenvoudigende aannames oor market en aandele; en 3) verhoogde sensitiwiteit tot nuwe data.


 

 

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