Knowledge representation and integration for portfolio evaluation using linear belief functions

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Issue Date
2006-07Author
Liu, Liping
Shenoy, Catherine
Shenoy, Prakash P.
Publisher
The Institute of Electrical and Electronic Engineers, Inc.
Format
5439358 bytes
Type
Article
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Show full item recordAbstract
In this paper, we propose a linear belief function approach to evaluating portfolio performance. By drawing on the notion of linear belief functions, we propose an elementary approach to knowledge representation for expert systems using linear belief functions. We show how to use basic matrices to represent market information and financial knowledge, including complete ignorance, statistical observations, subjective speculations, distributional assumptions, linear relations, and empirical asset pricing models. We then appeal to Dempster’s rule of combination to integrate the knowledge for assessing the overall belief of portfolio performance, and updating the belief by incorporating additional information. We use an example of three gold stocks to illustrate the approach.
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Citation
Liu, L., C. Shenoy, and P. P. Shenoy, "Knowledge representation and integration for portfolio evaluation using linear belief functions," IEEE Transactions on Systems, Man, and Cybernetics, Part A: Systems and Humans, Vol. 36, No. 4, July 2006, pp. 774--785.
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