Reputation Performance: a portfolio selection approach

This paper introduces a normative view on corporate reputation management; an algorithmic model for reputation-driven strategic decision making is proposed and corporate reputation is conceptualized as influenced by a selection among organizational priorities. A portfolio-based approach is put forward; we draw on the foundations of portfolio theory and we create a portfolio-based reputation management model where reputation components and priorities are weighted by decision makers and shape organizational change in an attempt to formulate a corporate reputation strategy. The rationale of this paper is based on the foundational consideration of organizations as choosing the optimal strategy by seeking to maximize performance on corporate reputation capital while maintaining organizational stability and minimizing organizational risk.

Portfolio selection under higher moments using fuzzy multi-objective linear programming

Since asset returns have been recognized as not normally distributed, the avenue of research regarding portfolio higher moments soon emerged. To account for uncertainty and vagueness of portfolio returns as well as of higher moment risks, we proposed a new portfolio selection model employing fuzzy sets in this paper. A fuzzy multi-objective linear programming (MOLP) for portfolio optimization is formulated using marginal impacts of assets on portfolio higher moments, which are modelled by trapezoidal fuzzy numbers. Through a consistent centroid-based ranking of fuzzy numbers, the fuzzy MOLP is transformed into an MOLP that is then solved by the maximin method. By taking portfolio higher moments into account, the approach enables investors to optimize not only the normal risk (variance) but also the asymmetric risk (skewness) and the risk of fat-tails (kurtosis). An illustrative example demonstrates the efficiency of the proposed methodology comparing to previous portfolio optimization models.

Ensaios em Finanças

Esta tese é composta de três artigos sobre finanças. O primeiro tem o título "Nonparametric Option Pricing with Generalized Entropic Estimators " e estuda um método de apreçamento de derivativos em mercados incompletos. Este método está relacionado com membros da família de funções de Cressie-Read em que cada membro fornece uma medida neutra ao risco. Vários testes são feitos. Os resultados destes testes sugerem um modo de definir um intervalo robusto para preços de opções. Os outros dois artigos são sobre anúncios agendados em diferentes situações. O segundo se chama "Watching the News: Optimal Stopping Time and Scheduled Announcements" e estuda problemas de tempo de parada ótimo na presença de saltos numa data fixa em modelos de difusão com salto. Fornece resultados sobre a otimalidade do tempo de parada um pouco antes do anúncio. O artigo aplica os resultados ao tempo de exercício de Opções Americanas e ao tempo ótimo de venda de um ativo. Finalmente o terceiro artigo estuda um problema de carteira ótima na presença de custo fixo quando os preços podem saltar numa data fixa. Seu título é "Dynamic Portfolio Selection with Transactions Costs and Scheduled Announcement" e o resultado mais interessante é que o comportamento do investidor é consistente com estudos empíricos sobre volume de transações em momentos próximos de anúncios.

Optimal mean-variance control for discrete-time linear systems with Markovian jumps and multiplicative noises

In this paper, we consider the stochastic optimal control problem of discrete-time linear systems subject to Markov jumps and multiplicative noises under two criteria. The first one is an unconstrained mean-variance trade-off performance criterion along the time, and the second one is a minimum variance criterion along the time with constraints on the expected output. We present explicit conditions for the existence of an optimal control strategy for the problems, generalizing previous results in the literature. We conclude the paper by presenting a numerical example of a multi-period portfolio selection problem with regime switching in which it is desired to minimize the sum of the variances of the portfolio along the time under the restriction of keeping the expected value of the portfolio greater than some minimum values specified by the investor. (C) 2011 Elsevier Ltd. All rights reserved.

Financial Decisions via Methods of Guaranteed Control Theory

AMS subject classification: 93C95, 90A09.

Selection of the right risk measures for portfolio allocation

 An optimisation framework is proposed to enable investors to select the right risk measures in portfolio selection. Verification is deployed by performing experiments in developed markets (e.g., the US stock market), emerging markets (e.g., the South Korean stock market) and global investments. A preselection procedure dealing with large datasets is also introduced to eliminate stocks that have low diversification potential before running the portfolio optimisation model. Portfolios are evaluated by four performance indices, i.e., the Sortino ratio, the Sharpe ratio, the Stutzer performance index, and the Omega measure. Experimental results demonstrate that high performance and also well-diversified portfolios are obtained if modified value-at-risk, variance, or semi-variance is concerned whereas emphasising only skewness, kurtosis or higher moments in general produces low performance and poorly diversified portfolios. In addition, the preselection applied to large datasets results in portfolios that have not only high performance but also high diversification degree.

Consumption and portfolio rules whit stochastic hyperbolic discounting

We extend the classic Merton (1969, 1971) problem that investigates the joint consumption-savings and portfolio-selection problem under capital risk by assuming sophisticated but time-inconsistent agents. We introduce stochastic hyperbolic preferences as in Harris and Laibson (2013) and find closed-form solutions for Merton's optimal consumption and portfolio selection problem in continuous time. We find that the portfolio rule remains identical to the time-consistent solution with power utility and no borrowing constraints. However,the marginal propensity to consume out of wealth is unambiguously greater than the time-consistent, exponential case and,importantly, it is also more responsive to changes in risk. These results suggest that hyperbolic discounting with sophisticated agents offers promise for contributing to explaining important aspects of asset market data.

Commercial agentes portfolio optimization in electricity markets

As it is well known, competitive electricity markets require new computing tools for power companies that operate in retail markets in order to enhance the management of its energy resources. During the last years there has been an increase of the renewable penetration into the micro-generation which begins to co-exist with the other existing power generation, giving rise to a new type of consumers. This paper develops a methodology to be applied to the management of the all the aggregators. The aggregator establishes bilateral contracts with its clients where the energy purchased and selling conditions are negotiated not only in terms of prices but also for other conditions that allow more flexibility in the way generation and consumption is addressed. The aggregator agent needs a tool to support the decision making in order to compose and select its customers' portfolio in an optimal way, for a given level of profitability and risk.

Definition of an it project portfolio management methodology for a pharmaceutical company

Con la creciente popularidad de las soluciones de IT como factor clave para aumentar la competitividad y la creación de valor para las empresas, la necesidad de invertir en proyectos de IT se incrementa considerablemente. La limitación de los recursos como un obstáculo para invertir ha obligado a las empresas a buscar metodologías para seleccionar y priorizar proyectos, asegurándose de que las decisiones que se toman son aquellas que van alineadas con las estrategias corporativas para asegurar la creación de valor y la maximización de los beneficios. Esta tesis proporciona los fundamentos para la implementación del Portafolio de dirección de Proyectos de IT (IT PPM) como una metodología eficaz para la gestión de proyectos basados en IT, y una herramienta para proporcionar criterios claros para los directores ejecutivos para la toma de decisiones. El documento proporciona la información acerca de cómo implementar el IT PPM en siete pasos, el análisis de los procesos y las funciones necesarias para su ejecución exitosa. Además, proporciona diferentes métodos y criterios para la selección y priorización de proyectos. Después de la parte teórica donde se describe el IT PPM, la tesis aporta un análisis del estudio de caso de una empresa farmacéutica. La empresa ya cuenta con un departamento de gestión de proyectos, pero se encontró la necesidad de implementar el IT PPM debido a su amplia cobertura de procesos End-to-End en Proyectos de IT, y la manera de asegurar la maximización de los beneficios. Con la investigación teórica y el análisis del estudio de caso, la tesis concluye con una definición práctica de un modelo aproximado IT PPM como una recomendación para su implementación en el Departamento de Gestión de Proyectos.

Dynamic access point association using software defined networking

Previous attempts in addressing Access Point (AP) association at overlapping zone of IEEE 802.11 networks have shown some issues. They work passively and estimate load from different network metrics such as frame delay, packet loss, number of users etc. that may not always true. Further the user behaviour is selfish i.e. illegitimate user consume high network resources. This adversely affect existing or new users which in turn motivates them to change locations. To alleviate these issues, we propose the use of a Software Defined Networking (SDN) enabled client side (wireless end user) solution. In this paper, we start by proposing a dynamic AP selection algorithm/framework in wireless user device. The device receive network resource related statistics from SDN Controller and guide the client device to associate itself with the best selected AP. We justify that the use of SDN discourage users to act selfishly. Further, a mathematical modelling of the proposed scheme is derived using Fuzzy membership function and the simulation is carried out. Results obtained from simulation necessitates to implement SDN enabled client side methods.

Optimization of the Investment Portfolio in the Conditions of Uncertainty

Portfolio analysis exists, perhaps, as long, as people think about acceptance of rational decisions connected with use of the limited resources. However the occurrence moment of portfolio analysis can be dated precisely enough is having connected it with a publication of pioneer work of Harry Markovittz (Markovitz H. Portfolio Selection) in 1952. The model offered in this work, simple enough in essence, has allowed catching the basic features of the financial market, from the point of view of the investor, and has supplied the last with the tool for development of rational investment decisions. The central problem in Markovitz theory is the portfolio choice that is a set of operations. Thus in estimation, both separate operations and their portfolios two major factors are considered: profitableness and risk of operations and their portfolios. The risk thus receives a quantitative estimation. The account of mutual correlation dependences between profitablenesses of operations appears the essential moment in the theory. This account allows making effective diversification of portfolio, leading to essential decrease in risk of a portfolio in comparison with risk of the operations included in it. At last, the quantitative characteristic of the basic investment characteristics allows defining and solving a problem of a choice of an optimum portfolio in the form of a problem of quadratic optimization.

A sequencing approach for creating new train timetables

Train scheduling is a complex and time consuming task of vital importance. To schedule trains more accurately and efficiently than permitted by current techniques a novel hybrid job shop approach has been proposed and implemented. Unique characteristics of train scheduling are first incorporated into a disjunctive graph model of train operations. A constructive algorithm that utilises this model is then developed. The constructive algorithm is a general procedure that constructs a schedule using insertion, backtracking and dynamic route selection mechanisms. It provides a significant search capability and is valid for any objective criteria. Simulated Annealing and Local Search meta-heuristic improvement algorithms are also adapted and extended. An important feature of these approaches is a new compound perturbation operator that consists of many unitary moves that allows trains to be shifted feasibly and more easily within the solution. A numerical investigation and case study is provided and demonstrates that high quality solutions are obtainable on real sized applications.

From the editor

In this Project Management Journal issue, the reader will “travel” from human capital to portfolio selection through knowledge development and maturity, systems thinking and problem (dis)solving, and development of combinative capabilities...

THE quest for alpha : can artificial neural networks help?

The application of artificial neural networks (ANN) in finance is relatively new area of research. We employed ANNs that used both fundamental and technical inputs to predict future prices of widely held Australian stocks and used these predicted prices for stock portfolio selection over a 10-year period (2001-2011). We found that the ANNs generally do well in predicting the direction of stock price movements. The stock portfolios selected by the ANNs with median accuracy are able to generate positive alpha over the 10-year period. More importantly, we found that a portfolio based on randomly selected network configuration had zero chance of resulting in a significantly negative alpha but a 27% chance of yielding a significantly positive alpha. This is in stark contrast to the findings of the research on mutual fund performance where active fund managers with negative alphas outnumber those with positive alphas.