A fuzzy index tracking portfolio selection model

Abstract

The investment strategies can be divided into two classes: passive investment strategies and active investment strategies. An index tracking investment strategy belongs to the class of passive investment strategies. The index tracking error and the excess return are considered as two objective functions, a bi-objective programming model is proposed for the index tracking portfolio selection problem. Furthermore, based on fuzzy decision theory, a fuzzy index tracking portfolio selection model is also proposed. A numerical example is given to illustrate the behavior of the proposed fuzzy index tracking portfolio selection model. © Springer-Verlag Berlin Heidelberg 2005.