Paper Title
The Optimum Mutual Fund Portfolio under Investors’ Different Degree of Risk Preference and Prudence - An Application of MVS Model

Abstract
If people want to use mutual funds to build an investment portfolio, they would select those with better performance based on investors’ preference. The famous methods to select mutual funds is the Portfolio Theory from Markowitz(1952). The portfolio theory is also called Mean-Variance Model (MV Model).The MV Model has two assumptions. First, asset processes are normally distributed, and secondly, investors have quadratic utility functions. However, the distribution of return usually occur at extreme values, and it isn’t normal distribution. Therefore, it should take the higher moment into account (Simkowitz and Beedles,1978). This study applies the mean-variance-skewness(MVS) shortage function from Briec, Kerstens and Jokung (2007) to evaluate mutual fund performance. The shortage function is extended to the MVS space to account for a preference for positive skewness in addition to a preference for returns and an aversion to risks. This method can maximize the mean and skewness, meanwhile minimize the variance by using the shortage function. In addition, this study’s contribution is designing the questionnaire to evaluate investor’s preference. In the Briec, Kerstens and Jokung (2007) paper, they didn’t discuss about the calculation of the coefficients of the MVS utility function. According to the result of the questionnaire, this study uses TOPSIS to transform it into coefficients, and apply to the MVS utility function. By using the MVS shortage function, this study will be able to suggest the optimal mutual funds portfolio based on investors’ preference. Keywords - Mutual Funds; Shortage Function; MVS Model; Optimal Portfolio