Portfolios Optimizations of Behavioral Stocks with Perception Probability Weightings

摘要

Having traceable stock price movements and predictable market trends can always benefit investors. Considering specific irrational investor behaviors that may collectively affect a stock's price movement, we identified the cause-and-effect return patterns of affected stocks (behavioral-stocks) with their corresponding time-to-effects and likelihood-of-effects. Considering different individual investor perceptions on future market performances, we transformed investor perceptions into probability weights on future market performances, wherein the weights are also consistent with the estimated likelihood-of-effects of behavioral-stocks. Utilizing a scenario-based mixed-integer behavioral-stocks portfolio optimization program embedded with a new two-dimensional weightings on scenarios and behavioral-stocks, we obtained portfolios that statistically outperform the market.