{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2025,8,2]],"date-time":"2025-08-02T17:34:28Z","timestamp":1754156068483,"version":"3.41.2"},"reference-count":45,"publisher":"Emerald","issue":"2","license":[{"start":{"date-parts":[[2021,5,26]],"date-time":"2021-05-26T00:00:00Z","timestamp":1621987200000},"content-version":"tdm","delay-in-days":0,"URL":"https:\/\/www.emerald.com\/insight\/site-policies"}],"content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":["JRF"],"published-print":{"date-parts":[[2021,6,29]]},"abstract":"<jats:sec><jats:title content-type=\"abstract-subheading\">Purpose<\/jats:title><jats:p>This paper aims to explore the trade-off between liquidity, risk and return under sectoral diversification across distinct economic settings and investment strategies.<\/jats:p><\/jats:sec><jats:sec><jats:title content-type=\"abstract-subheading\">Design\/methodology\/approach<\/jats:title><jats:p>A novel multi-objective portfolio model is proposed to assess investment decisions under sectoral diversification, where the objective functions and constraints are interval-valued. The objective functions used are risk minimization (through the semi-absolute deviation measure of risk), maximization of liquidity (using turnover as a proxy) and the maximization of logarithmic return. Besides coherence constraints (imposing that the sum of the percentages of investment assigned to each stock should be equal to 100%), constraints regarding the maximum proportion of capital that can be invested (ensuring a minimum level of diversification) and cardinality constraints (to account for transaction costs) are also imposed.<\/jats:p><\/jats:sec><jats:sec><jats:title content-type=\"abstract-subheading\">Findings<\/jats:title><jats:p>Besides the trade-off between return and risk, the study findings highlight a trade-off between liquidity and return and a positive relationship between risk and liquidity. Under an economic crisis scenario, the trade-off between return and liquidity is reduced. With the economic recovery, the levels of risk increase when contrasted with the setting of the economic crisis. The highest liquidity levels are reached with the economic boom, whereas the highest returns are obtained with the economic recession.<\/jats:p><\/jats:sec><jats:sec><jats:title content-type=\"abstract-subheading\">Originality\/value<\/jats:title><jats:p>This paper suggests a new modeling approach for assessing the trade-offs between liquidity, risk and return under different scenarios and investment strategies. A new interactive procedure inspired on the reference point approach is also proposed to obtain possibly efficient portfolios according to the investor's preferences. Regarding previous approaches suggested in the literature, this new procedure allows obtaining both supported and unsupported efficient solutions when cardinality constraints are included.<\/jats:p><\/jats:sec>","DOI":"10.1108\/jrf-05-2020-0101","type":"journal-article","created":{"date-parts":[[2021,5,25]],"date-time":"2021-05-25T11:40:54Z","timestamp":1621942854000},"page":"130-152","source":"Crossref","is-referenced-by-count":3,"title":["Exploring the trade-off between liquidity, risk and return under sectoral diversification across distinct economic settings"],"prefix":"10.1108","volume":"22","author":[{"ORCID":"https:\/\/orcid.org\/0000-0003-4045-6101","authenticated-orcid":false,"given":"Carla","family":"Henriques","sequence":"first","affiliation":[]},{"ORCID":"https:\/\/orcid.org\/0000-0002-6250-1113","authenticated-orcid":false,"given":"Elisabete","family":"Neves","sequence":"additional","affiliation":[]}],"member":"140","published-online":{"date-parts":[[2021,5,26]]},"reference":[{"issue":"6","key":"key2021062813112017900_ref001","doi-asserted-by":"crossref","first-page":"1574","DOI":"10.1016\/j.jimonfin.2012.02.016","article-title":"Foreign exchange market efficiency under recent crises: Asia-Pacific focus","volume":"31","year":"2012","journal-title":"Journal of International Money and Finance"},{"key":"key2021062813112017900_ref002","doi-asserted-by":"crossref","first-page":"223","DOI":"10.1016\/0304-405X(86)90065-6","article-title":"Asset pricing and the bid-ask spread","volume":"17","year":"1986","journal-title":"Journal of Financial Economics"},{"issue":"4","key":"key2021062813112017900_ref003","doi-asserted-by":"crossref","first-page":"8","DOI":"10.1111\/j.1745-6622.2000.tb00016.x","article-title":"The liquidity route to a lower cost of capital","volume":"12","year":"2000","journal-title":"The Journal of Applied Corporate Finance"},{"issue":"3","key":"key2021062813112017900_ref004","doi-asserted-by":"crossref","first-page":"1099","DOI":"10.1111\/jofi.12149","article-title":"Connected stocks","volume":"69","year":"2014","journal-title":"The Journal of Finance"},{"key":"key2021062813112017900_ref005","doi-asserted-by":"crossref","first-page":"21","DOI":"10.2307\/2331149","article-title":"Price volatility, trading volume, and market depth: evidence from the futures markets","volume":"28","year":"1993","journal-title":"Journal of Financial and Quantitative Analysis"},{"issue":"1","key":"key2021062813112017900_ref006","doi-asserted-by":"crossref","first-page":"126","DOI":"10.1016\/j.camwa.2010.10.039","article-title":"Fuzzy mean\u2013variance\u2013skewness portfolio selection models by interval analysis","volume":"61","year":"2011","journal-title":"Computers and Mathematics with Applications"},{"issue":"4","key":"key2021062813112017900_ref007","doi-asserted-by":"crossref","first-page":"405","DOI":"10.1108\/JRF-01-2016-0002","article-title":"Portfolio dynamics under illiquidity","volume":"17","year":"2016","journal-title":"The Journal of Risk Finance"},{"key":"key2021062813112017900_ref008","doi-asserted-by":"crossref","first-page":"72","DOI":"10.1016\/j.iref.2015.10.018","article-title":"Does the return-state-varying relationship between risk and return matter in modeling the time series process of stock return?","volume":"42","year":"2016","journal-title":"International Review of Economics and Finance"},{"issue":"5","key":"key2021062813112017900_ref009","doi-asserted-by":"crossref","first-page":"556","DOI":"10.1108\/JRF-06-2019-0107","article-title":"Portfolio allocation across variance risk premia","volume":"20","year":"2019","journal-title":"The Journal of Risk Finance"},{"issue":"2","key":"key2021062813112017900_ref010","doi-asserted-by":"crossref","first-page":"209","DOI":"10.1057\/palgrave.jors.2600891","article-title":"Linear programming with interval coefficients","volume":"51","year":"2000","journal-title":"Journal of the Operational Research Society"},{"issue":"2","key":"key2021062813112017900_ref011","first-page":"501","article-title":"Market liquidity and trading activity","volume":"56","year":"2000","journal-title":"The Journal of Finance"},{"issue":"2","key":"key2021062813112017900_ref012","doi-asserted-by":"crossref","first-page":"243","DOI":"10.1016\/j.jfineco.2011.03.008","article-title":"Recent trends in trading activity and market quality","volume":"101","year":"2011","journal-title":"Journal of Financial Economics"},{"issue":"1","key":"key2021062813112017900_ref013","doi-asserted-by":"crossref","first-page":"41","DOI":"10.1016\/j.jacceco.2014.06.001","article-title":"Have capital market anomalies attenuated in the recent era of high liquidity and trading activity?","volume":"58","year":"2014","journal-title":"Journal of Accounting and Economics"},{"issue":"5","key":"key2021062813112017900_ref014","doi-asserted-by":"crossref","first-page":"390","DOI":"10.1504\/IJMEF.2019.102954","article-title":"The risk-return trade-off of liquidity positions: evidence from Vietnamese banking system","volume":"12","year":"2019","journal-title":"International Journal of Monetary Economics and Finance"},{"issue":"2","key":"key2021062813112017900_ref015","doi-asserted-by":"crossref","first-page":"203","DOI":"10.1016\/S1386-4181(97)00004-9","article-title":"Liquidity and stock returns: an alternative test","volume":"1","year":"1998","journal-title":"Journal of Financial Markets"},{"issue":"1","key":"key2021062813112017900_ref016","doi-asserted-by":"crossref","first-page":"33","DOI":"10.2307\/1882244","article-title":"The cost of transacting","volume":"82","year":"1968","journal-title":"Quarterly Journal of Economics"},{"issue":"11","key":"key2021062813112017900_ref017","doi-asserted-by":"crossref","first-page":"1075","DOI":"10.1080\/1351847X.2020.1724551","article-title":"Is there a risk and return relation?","volume":"26","year":"2020","journal-title":"The European Journal of Finance"},{"key":"key2021062813112017900_ref018","doi-asserted-by":"crossref","first-page":"210","DOI":"10.1016\/j.jimonfin.2014.02.006","article-title":"On stock market illiquidity and real-time GDP","volume":"44","year":"2014","journal-title":"Journal of International Money and Finance"},{"key":"key2021062813112017900_ref019","doi-asserted-by":"crossref","first-page":"281","DOI":"10.1016\/j.ribaf.2015.02.006","article-title":"Liquidity commonality and pricing in UK equities","volume":"34","year":"2015","journal-title":"Research in International Business and Finance"},{"key":"key2021062813112017900_ref020","doi-asserted-by":"crossref","first-page":"43","DOI":"10.1016\/j.jedc.2015.11.002","article-title":"A new approach to risk-return trade-off dynamics via decomposition","volume":"62","year":"2016","journal-title":"Journal of Economic Dynamics and Control"},{"issue":"2","key":"key2021062813112017900_ref021","doi-asserted-by":"crossref","first-page":"199","DOI":"10.1093\/rfs\/5.2.199","article-title":"Stock prices and volume","volume":"5","year":"1992","journal-title":"Review of Financial Studies"},{"issue":"2","key":"key2021062813112017900_ref022","doi-asserted-by":"crossref","first-page":"333","DOI":"10.1017\/S0022109012000130","article-title":"Asset liquidity and stock liquidity","volume":"47","year":"2012","journal-title":"Journal of Financial and Quantitative Analysis"},{"volume-title":"Fuzzy Portfolio Optimization: Advances in Hybrid Multi-Criteria Methodologies","year":"2014","key":"key2021062813112017900_ref023"},{"key":"key2021062813112017900_ref024","doi-asserted-by":"crossref","first-page":"473","DOI":"10.1093\/rfs\/5.3.473","article-title":"Differences of opinion make a horse race","volume":"6","year":"1993","journal-title":"Review of Financial Studies"},{"issue":"10","key":"key2021062813112017900_ref025","doi-asserted-by":"crossref","first-page":"1639","DOI":"10.1080\/01605682.2019.1571004","article-title":"A multiobjective interval portfolio framework for supporting investor's preferences under different risk assumptions","volume":"70","year":"2019","journal-title":"Journal of the Operational Research Society"},{"key":"key2021062813112017900_ref026","doi-asserted-by":"crossref","first-page":"35","DOI":"10.1016\/j.seps.2018.07.004","article-title":"A multiobjective interval programming model to explore the trade-offs among different aspects of job satisfaction under different scenarios","volume":"66","year":"2019","journal-title":"Socio-Economic Planning Sciences"},{"issue":"1","key":"key2021062813112017900_ref027","doi-asserted-by":"crossref","first-page":"341","DOI":"10.1016\/j.ejor.2019.11.009","article-title":"New conditions for testing necessarily\/possibly efficiency of non-degenerate basic solutions based on the tolerance approach","volume":"283","year":"2020","journal-title":"European Journal of Operational Research"},{"issue":"3","key":"key2021062813112017900_ref028","doi-asserted-by":"crossref","first-page":"345","DOI":"10.1016\/0377-2217(91)90169-V","article-title":"Goal programming problems with interval coefficients and target intervals","volume":"52","year":"1991","journal-title":"European Journal of Operational Research"},{"key":"key2021062813112017900_ref029","doi-asserted-by":"crossref","first-page":"109","DOI":"10.2307\/2330874","article-title":"The relation between price changes and trading volume: a survey","volume":"22","year":"1987","journal-title":"Journal of Financial and Quantitative Analysis"},{"issue":"5","key":"key2021062813112017900_ref030","doi-asserted-by":"crossref","first-page":"519","DOI":"10.1287\/mnsc.37.5.519","article-title":"Mean-absolute deviation portfolio optimization model and its applications to Tokyo stock market","volume":"37","year":"1991","journal-title":"Management Science"},{"issue":"2","key":"key2021062813112017900_ref031","doi-asserted-by":"crossref","first-page":"121","DOI":"10.1016\/j.ememar.2004.11.001","article-title":"Empirical evidence on cross-listed stocks of Central and Eastern European companies","volume":"6","year":"2005","journal-title":"Emerging Markets Review"},{"issue":"4","key":"key2021062813112017900_ref032","doi-asserted-by":"crossref","first-page":"827","DOI":"10.1007\/s12597-015-0210-0","article-title":"Portfolio rebalancing model with transaction costs using interval optimization","volume":"52","year":"2015","journal-title":"Opsearch"},{"issue":"6","key":"key2021062813112017900_ref033","doi-asserted-by":"crossref","first-page":"3311","DOI":"10.1007\/s13369-018-3077-6","article-title":"Multiobjective efficient portfolio selection with bounded parameters","volume":"43","year":"2018","journal-title":"Arabian Journal for Science and Engineering"},{"issue":"1","key":"key2021062813112017900_ref034","first-page":"23","article-title":"The short-term and long-term trade-off between risk and return: chaos vs rationality","volume":"21","year":"2020","journal-title":"Journal of Business Economics and Management"},{"issue":"1","key":"key2021062813112017900_ref035","first-page":"77","article-title":"Portfolio selection","volume":"7","year":"1952","journal-title":"The Journal of Finance"},{"key":"key2021062813112017900_ref036","doi-asserted-by":"crossref","first-page":"107","DOI":"10.1016\/j.intfin.2014.05.008","article-title":"A cross-country analysis of herd behavior in Europe","volume":"32","year":"2014","journal-title":"Journal of International Financial Markets, Institutions and Money"},{"issue":"3","key":"key2021062813112017900_ref037","doi-asserted-by":"crossref","first-page":"1434","DOI":"10.1016\/j.ejor.2005.12.042","article-title":"Multiple objective linear programming models with interval coefficients \u2013 an illustrated overview","volume":"181","year":"2007","journal-title":"European Journal of Operational Research"},{"issue":"6","key":"key2021062813112017900_ref038","doi-asserted-by":"crossref","first-page":"854","DOI":"10.1007\/s10958-009-9606-9","article-title":"An interactive method of tackling uncertainty in interval multiple objective linear programming","volume":"161","year":"2009","journal-title":"Journal of Mathematical Sciences"},{"issue":"3","key":"key2021062813112017900_ref039","doi-asserted-by":"crossref","first-page":"642","DOI":"10.1086\/374184","article-title":"Liquidity risk and expected stock returns","volume":"111","year":"2003","journal-title":"Journal of Political Economy"},{"key":"key2021062813112017900_ref040","first-page":"971","article-title":"Liquidity and profitability relationship and financial fallacy","year":"2019","journal-title":"Think India Journal, ISSN"},{"issue":"71","key":"key2021062813112017900_ref041","doi-asserted-by":"crossref","first-page":"259","DOI":"10.1590\/1808-057x201601530","article-title":"Return and liquidity relationships on market and accounting levels in Brazil","volume":"27","year":"2016","journal-title":"Revista Contabilidade and Finan\u00e7as"},{"key":"key2021062813112017900_ref042","doi-asserted-by":"crossref","first-page":"405","DOI":"10.1093\/rfs\/6.2.405","article-title":"Volume, volatility, and the dispersion of beliefs","volume":"6","year":"1993","journal-title":"Review of Financial Studies"},{"key":"key2021062813112017900_ref043","first-page":"107","article-title":"Linear programming models for portfolio optimization","volume":"14","year":"1993","journal-title":"Finance"},{"key":"key2021062813112017900_ref044","doi-asserted-by":"crossref","unstructured":"Wierzbicki, A.P. (1980), \u201cThe use of reference objectives in multiobjective optimization\u201d, in Fandel, G. and Gal, T. (Eds), Multiple Criteria Decision Making Theory and Application, Springer Berlin Heidelberg, Berlin, pp. 468-486.","DOI":"10.1007\/978-3-642-48782-8_32"},{"issue":"3","key":"key2021062813112017900_ref045","doi-asserted-by":"crossref","first-page":"1203","DOI":"10.1007\/s00500-014-1583-3","article-title":"An interval mean\u2013average absolute deviation model for multiperiod portfolio selection with risk control and cardinality constraints","volume":"20","year":"2016","journal-title":"Soft Computing"}],"container-title":["The Journal of Risk Finance"],"original-title":[],"language":"en","link":[{"URL":"https:\/\/www.emerald.com\/insight\/content\/doi\/10.1108\/JRF-05-2020-0101\/full\/xml","content-type":"application\/xml","content-version":"vor","intended-application":"text-mining"},{"URL":"https:\/\/www.emerald.com\/insight\/content\/doi\/10.1108\/JRF-05-2020-0101\/full\/html","content-type":"unspecified","content-version":"vor","intended-application":"similarity-checking"}],"deposited":{"date-parts":[[2025,7,24]],"date-time":"2025-07-24T22:22:30Z","timestamp":1753395750000},"score":1,"resource":{"primary":{"URL":"http:\/\/www.emerald.com\/jrf\/article\/22\/2\/130-152\/249458"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2021,5,26]]},"references-count":45,"journal-issue":{"issue":"2","published-online":{"date-parts":[[2021,5,26]]},"published-print":{"date-parts":[[2021,6,29]]}},"alternative-id":["10.1108\/JRF-05-2020-0101"],"URL":"https:\/\/doi.org\/10.1108\/jrf-05-2020-0101","relation":{},"ISSN":["1526-5943"],"issn-type":[{"type":"print","value":"1526-5943"}],"subject":[],"published":{"date-parts":[[2021,5,26]]}}}