Advances in Economics, Management and Political Sciences
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Proceedings of the 2022 International Conference on Financial Technology and Business Analysis (ICFTBA 2022), Part 1
Series Vol. 5 , 24 April 2023
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On Cooperative Game Approaches For Optimal Portfolio Selection
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Abstract
Cooperative game theory is concerned with exploring schemes for allocating payoffs among rational participants in coalitions and has produced several solution designs due to the different emphasis on criteria such as stability and fairness, but this theory has not been widely applied in the field of portfolio selection. In this paper, we explore further applications of the solution concepts of cooperative games based on the model of optimal portfolio selection developed in previous studies, which is modelled in a static form of a non-cooperative zero-sum game between investors and the market and a cooperative game between investors. We propose a risk modified Shapley value based on the tradeoff between return and risk in the financial market based on the Shapley value, and the performance of this solution shows an evident improvement. We also introduce some other solution concepts of cooperative games and give an approach to construct a nucleolus-based portfolio using Maschler's scheme to compute the nucleolus, and the results demonstrate that the allocation schemes based on the cooperative game theory perform well.
Keywords
Optimal Portfolio Selection, Cooperative Game Theory, Risk Modified Shapley Value, Nucleolus, Stock Market
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Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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- Volume Title
- Proceedings of the 2022 International Conference on Financial Technology and Business Analysis (ICFTBA 2022), Part 1
- ISBN (Print)
- 978-1-915371-21-8
- ISBN (Online)
- 978-1-915371-22-5
- Published Date
- 24 April 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/5/20220075
- Copyright
- 24 April 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited