ABSTRACT
The primary goal of a fund manager is to assign funds to individual stocks to produce the maximum annual return to the investor. An interactive approach to portfolio management is an alternative approach to constructing a portfolio based on the experience of an investment professional. Goal Programming (GP) is a kind of interactive approach that can be used for fund diversification with different weights assigned to different goals. This chapter introduces an interactive weight-based portfolio system that allows fund managers to select different weight values of annual return and risk. A GP approach is used in the system to calculate the best annual return with different risk profiles. In this chapter, the empirical work shows how the model would work when applied to the BSE SENSEX (Bombay Stock Exchange). Annual return and risk are defined as goals in the GP, and then different priority structures are used to calculate the maximum annual return with the accepted level of risk. The result shows that the maximum annual return is achieved when a high-weight value is assigned to the annual return.
