Study On Portfolio Selection Models Based On Behavioral Finance

After 40'year endeavor, modern finance (MF) has been established a suit of integrity theory system( from axiom theories to application theories), which inherit the mainstream economic (especialy Neoclassic Economic) approach and mathematical analysis technology. Many classical theories and models of MF are based on the rational agent suppose and Efficient Market Hypothesis (EMH) put forward by Fama, which research pattern also localized on the analysis frame of complete rationality. Rational agent suppose makes modern finance theories overlook man's concrete decision-making behavior, then decision-making course is turned into a black-box.However, people are quite difficult to live up to complete rationality in the real life. Finance specialists have been encountered many anomalies which cannot be explained by modern finance theories, when they applied the models and approachs of modern finance theories to make empirical tests on finance market. At the same time, finance specialists found there were rather errors when they were applied to forecast economy. Under such situation, in order to make theories more accord with realism, some economist introduced individual' subjective factors and psychology factors into finance study fields. Then, the upsurge of study Behavoral Finance (BF) rised gradually in the later 1980s. After near 20 years development, based on bounded rationality and limits to arbitrage, which are in opposition to modern finance theory, behavioral finance gradually formed its' basic viewpoints: investors are common agent rather are rational agent; investors are not homogenous; investors are loss aversion rather risk aversion; investors' risk attitude are not all consistent; and the market is also not efficient.Among modern finance theories, Modern portofio theory (MPT) is one of the most important theories, which is also based on the basises of modern finance theories. So MPT inevitably have its' localization: investors need only to maxmize their subjective expected utility in their decision-making course, on the assumption that investors' decision-making accord with ideal perfect finance market, namely investors possess such characters as rational expectation, risk aversion and utility maximum. Researches in behavioral finance indicate that hypothesis basises ofmodern portfolio theories do not accord with people's real decision-making psychology and behavior, and it is short of maneuverability.Based on according with people' decision-making psychology and behavior, it becomes an important task to study suited portfolio model to meet the needs of real invest application through change the hypothesis basises of MPT. Shefrin and Statman has made some valuable explore along such derection. We first suppose that investors can make good forecast for future and they violate Expected Utility Theory on the risk choose and risk judgement. Then based on those exited research fruits of BF and different risk measurement, and through combining BF with MPT, we present some behavioral portfolio models which can give investors better guidance for their real invest decision-making. The main research contents are as follows:1. The main theories accomplishment and basic viewpoints of MF are summarized. The challenge to MF from BF and basic viewpoints of BF are discussed briefly. The development history of MPT are also summrized ,and sum up the latest thoughts on MPT. We definitely bring forward that the development of finance should be combined BF research with MF research.2. The development historal of behavioral finance are summarized detailedly and the study system of BF are sum up generally.3. Aimed at such characters as losses aversion and reference-point setup which investors possess, setting out from the notion of variance risk, we put forward the mean-value variance model, the mean-subjective value variance model and mean-double target value variance model. We also discuss the utility function form of mean-value variance model and prove that the two fund separation theorem holds in the market when all investors adopt the same invest behavior.4. Based on deviation risk measurement, we bring forward a new risk meansureindex, namely value deviation , and put forward mean-absolute value deviation model and mean-maximize value deviation model, we also introduce such notion as return trade-off factor into the upper two model to improve them, which were put forward in decision-making science field, finally, on the assumpion that there are the same reference point for all the security, we present some portfolio models in which can be applied SP/A theory and vulue function.5. Introducing return balance factor, we substitute value deviation for return...