Fuzzy-Logic-Based Asset Allocation

This paper provides an introduction to how, on the basis of concepts from fuzzy logic, a model of asset allocation can be constructed which can represent and aggregate all the relevant quantitative and qualitative features of an investment plan realistically and in this way attains comparatively good recommendations like an expert. All calculation steps are carried out in a transparent and reproducible manner. In order to clarify the approach and the advantages of the procedure, a pilot model is developed. This supports the advisor with the asset allocation, by first analysing the features of the investment goal and the market expectations and then evaluating the merits of several investment strategies as well as displaying the steps towards their evaluation in a comprehensible manner. Based on case studies, the results of the pilot model are compared with known good recommendations from an investigation of Stiftung Warentest on the quality of advice in banks.