An Application of Fuzzy Set Theory to the Individual Investor Problem

Authors

  • Manuel Tarrazo Assistant Professor of Finance, McLaren School of Business, University of San Francisco, 2130 Fulton St., San Francisco, CA 94117-1080;

DOI:

https://doi.org/10.1016/S1057-0810(97)90021-4

Abstract

This study reviews the problem of the individual investor and applies to it a methodology based on fuzzy sets and the theory of possibility. The investment decision is characterized by uncertainty, imprecision and complexity, which lessen the eflectiveness of conventional calculus andprobability tools. In contrast, fuzzy set theory and its modeling language provide objects of analysis and algebra that are well suited to this problem. New concepts such as ‘fuzzy portfolio weights” are introduced. The result of our research is a qualitative, general, and practical model for individual investors’ decision making, which is based on Smith’s (1974) asset-mix model.

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Published

1997-06-30

How to Cite

Tarrazo, M. (1997). An Application of Fuzzy Set Theory to the Individual Investor Problem. Financial Services Review, 6(2), 97–107. https://doi.org/10.1016/S1057-0810(97)90021-4

Issue

Vol. 6 No. 2 (1997): Financial Services Review

Section

New Original Submission

License

Copyright (c) 1997 JAI Press Inc.

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