Stock Evaluation Using a Preference Disaggregation Methodology

Constantin Zopounidis · Michael Doumpos · Stelios H. Zanakis

68 citations0/0 files storedDecision Sciences

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Multi-Criteria Decision Making Decision Support System Applications Risk and Portfolio Optimization

Abstract

ABSTRACT This paper presents a real application of a multicriteria decision aid (MCDA) approach to portfolio selection based on preference disaggregation, using ordinal regression and linear programming (UTADIS method; UTilités Additives DIScriminantes). The additive utility functions that are derived through this approach have the extrapolation ability that any new alternative (share) can be easily evaluated and classified into one of several user‐predefined groups. The procedure is illustrated with a case study of 98 stocks from the Athens stock exchange, using 15 criteria. The results are encouraging, indicating that the proposed methodology could be used as a tool for the analysis of the portfolio managers' preferences and choices. Furthermore, the comparison with multiple discriminant analysis (either using a stepwise procedure or not) illustrates the superiority of the proposed methodology over a well‐known multivariate statistical technique that has been extensively used to study financial decision‐making problems.

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References

1952PORTFOLIO SELECTION*1982Modern Portfolio Theory and Investment Analysis.1982Assessing a set of additive utility functions for multicriteria decision-making, the UTA method 1995Advances in Multicriteria Analysis 1999Multicriteria decision aid in financial management 1995An Application of the UTA Discriminant Model for the Evaluation of R & D Projects 1997On The Use Of Multicriteria Decision Aid Methods To Portfolio Selection

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2004A multicriteria model for portfolio management 2013Multicriteria decision systems for financial problems 2000On the Evaluation of Greek Industrial SME's Performance via Multicriteria Analysis of Financial Ratios 2001Multicriteria Preference Disaggregation for Classification Problems with an Application to Global Investing Risk*2006Multicriteria Decision Aid/Analysis in Finance 2012Multicriteria Portfolio Management 2022A novel hybrid simplified group BWM and multi-criteria sorting approach for stock portfolio selection

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