Minimum Volatility of Anticipated Regret Model for Portfolio Selection

Based on the Regret Theory, we explore a mathematical model to quantify anticipated regret, from which the optimal portfolio strategy based on the minimum volatility of anticipated regret is derived using PSO algorithm. We make a comparision between our model and the mean-variance model, meanwhile, analyse effects of different degrees of anticpated regret on the optimal portfolio strategies obtained from the minimum volatility of anticipated regret under the same expected rate of return of the portfolio through empirical analysis. We find that if we take anticipated regret into account, the optimal proportion allocated in different risk-type assets will have a significant change, thus the overall risk and return of the portfolio.