An Empirical Study on the Application of Expected Utility-Entropy Decision Model in Securities Selecting in Shenzhen Stock Market

摘要

At first, we make a brief introduction to the Expected Utility-Entropy (EU-E) decision model, and then we apply this decision model to the selecting of securities. Using the EU-E decision model and Second Degreed Stochastic Dominance criterion (SSD) when selecting securities among stocks in Shenzhen 40 Component Index, we reach the conclusion that portfolios of stocks selected by EU-E decision model have larger returns with fixed risk than those of stocks selected by SSD criterion. Furthermore comparing the computing processes of these two methods, it is easy for investor to select stocks by using the EU-E decision model than by using the SSD criterion.