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Advances in Fuzzy Systems
Volume 2010 (2010), Article ID 879453, 7 pages
http://dx.doi.org/10.1155/2010/879453
Research Article

Portfolio Optimization of Equity Mutual Funds—Malaysian Case Study

1Department of Mathematics and Institute for Mathematical Research, University Putra Malaysia, 43400 UPM, Serdang, Selangor, Malaysia
2Department of Mathematics, University Malaysia Terengganu, 21030 UMT, Kuala Terengganu, Terengganu, Malaysia

Received 29 June 2009; Revised 4 December 2009; Accepted 23 January 2010

Academic Editor: Adel Alimi

Copyright © 2010 Adem Kılıçman and Jaisree Sivalingam. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We focus on the equity mutual funds offered by three Malaysian banks, namely Public Bank Berhad, CIMB, and Malayan Banking Berhad. The equity mutual funds or equity trust is grouped into four clusters based on their characteristics and categorized as inferior, stable, good performing, and aggressive funds based on their return rates, variance and treynor index. Based on the cluster analysis, the return rates and variance of clusters are represented as triangular fuzzy numbers in order to reflect the uncertainty of financial market. To find the optimal asset allocation in each cluster we develop a hybrid model of optimization and fuzzy based on return rates, variance. This was done by maximizing the fuzzy return for a tolerable fuzzy risk and minimizing the fuzzy risk for a desirable fuzzy return separately at different confidence levels.