A Discrete Stochastic Goal Program for Portfolio Selection: The Case of United Arab Emirates Equity Market

In this paper we propose a stochastic goal programming approach to generate a satisfying portfolio for the United Arab Emirates (UAE) equity market. Under the assumption of non-normality of the equity returns, we propose utilizing stochastic goal programming by considering all or a number of scenarios. Some of the goals considered in our model are capital preservation (total returns), current income, and risk. The model is tested on the monthly equity data in UAE from 2002 to 2005. The model results are compared to the traditional Markowitz model covering all the criteria to evidence the superiority of stochastic goal programming for portfolio optimization.