Behavioral portfolio as a tool supporting investment decisions

The article focuses on the relatively new group of methods supporting investment decisions. Behavioral portfolio theory was founded by Shefrin and Statman in 2002 and it relates to the assumption of the multigoal approach. The most frequently used method of portfolio selection - Markowitz's model - uses one of two admissible goals’ functions: maximization of the portfolio's rate of return or minimization of the portfolio's risk with the assumption that all investments are made at the same time. However real investors never have such a comfortable situation. Their investments are usually dynamic and often made under the influence of temporary emotional factors. This article is presenting one of many models that fit the behavioral approach. This attempt will combine behavioral portfolio theory with Maslow's hierarchy of needs using Markowitz's formula. The whole work is an experiment that has to imitate the real behavior of the investor. The aim of the article is to build the investment portfolio by imitating a real portfolio and comparing it with classical Markowitz's model to analyze its effectiveness. The data are collected from the Warsaw Stock Exchange and concerns stocks of companies quoted on the main market in 2020 and 2021 years.