Multi-period Portfolio Optimization Based on Asymmetric Credibilistic Return-Risk Ratios with Investors’ Coherent Perceptions

Abstract

In this study, we introduce asymmetric CVaR ratios and Sharpe ratios of generalized coherent fuzzy numbers to evaluate asymmetric extreme risk-adjusted and volatility risk-adjusted returns, incorporating investors’ coherent perceptions. Furthermore, we construct a multi-period credibilistic portfolio selection model with asymmetric return-risk ratios. Data from China’s financial markets is used to demonstrate the effectiveness of the proposed portfolio optimization models. The performance of optimal portfolios differs with respect to investors’ coherent perceptions and outperforms the benchmark models. Rational investors assign equal importance to lower and upper return-risk ratios in the optimal portfolio, selecting a robust investment strategy in the first period. Optimistic investors prioritize upper ratios and choose an aggressive investment strategy while pessimistic investors prefer lower ratios and choose a conservative investment strategy. Due to the different sensitivity to risk, rational and optimistic investors reduce the proportions of high-risk assets, while pessimistic investors increase the proportions of high-risk assets during next periods. The findings demonstrate that the model offers diverse investment strategies and serves as a valuable reference for different categories of investors to engage in multi-period asset allocation and risk management.