Fuzzy model for support investment decisions under risk

Abstract

One of the most important problem related to understanding the investor's behavior is to study the ways he selects, analyzes and interprets the available information and then uses it to make investment decisions. It is necessary to find out how an investor forms a certain opinion and comes to his own behavior strategy. The investor's behavioral model is variable since the financial market is volatile. The behavior of the investor is determined by a combination of rational (objective) and irrational (subjective) factors. To describe the influence of a combination of factors on the investor's behavior, a model describing this influence is needed. A formal description of interaction is complicated since a number of factors are of a qualitative nature, and the factors are also interrelated. The paper identifies the main causes and factors of irrationality in investor behavior which is the basis for its analyze and control. The fuzzy model, which allows to link a lot of behavioral factors with the utility (efficiency) of the solution is developed. Simulation results can be used for the investor’s utility functions designing that is required to decisions making justification.