IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v78y2018icp192-204.html
   My bibliography  Save this article

Optimization of multiple satisfaction levels in portfolio decision analysis

Author

Listed:
  • Barbati, Maria
  • Greco, Salvatore
  • Kadziński, Miłosz
  • Słowiński, Roman

Abstract

We consider a portfolio decision problem in which a set of projects forming a portfolio has to be selected taking into account multiple evaluation criteria and some constraints related to the limited resources (e.g., available budget). Traditionally, such a problem has been approached by Multiple Attribute Value Theory (MAVT) with the aim of maximizing the sum of values associated with the projects included in the selected portfolio. Using MAVT, one represents preferences on the individual projects, and a value of a portfolio is just an aggregate of values of the component projects. This linear value approach does not explicitly account for portfolio balance requirements, raising the risk of selecting a portfolio which is, e.g., composed of projects with good evaluations on the same criterion or on the same small subset of criteria. Thus, we propose a different approach that enables the Decision Maker (DM) to control the distribution of good evaluations on different criteria over the projects composing a portfolio. With this aim, for each criterion we fix a certain number of reference levels corresponding to the qualitative satisfaction degrees. The number of projects entering a portfolio and attaining each of these levels becomes an objective to be maximized. To solve thus formulated multi-objective optimization problem, we use Dominance-based Rough Set Approach (DRSA). The DM is expected to point out some prospective portfolios in a current sample of non-dominated portfolios. DRSA represents the DM’s preferences with a set of decision rules induced from such indirect preference information. Their use permits to progressively focus the search on the part of the non-dominated portfolios that satisfy the DM’s preferences in the best way.

Suggested Citation

  • Barbati, Maria & Greco, Salvatore & Kadziński, Miłosz & Słowiński, Roman, 2018. "Optimization of multiple satisfaction levels in portfolio decision analysis," Omega, Elsevier, vol. 78(C), pages 192-204.
    • Handle: RePEc:eee:jomega:v:78:y:2018:i:c:p:192-204
    DOI: 10.1016/j.omega.2017.06.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305048316307010
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.omega.2017.06.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas Knoke & Carola Paul & Patrick Hildebrandt & Baltazar Calvas & Luz Maria Castro & Fabian Härtl & Martin Döllerer & Ute Hamer & David Windhorst & Yolanda F. Wiersma & Giulia F. Curatola Fernández, 2016. "Compositional diversity of rehabilitated tropical lands supports multiple ecosystem services and buffers uncertainties," Nature Communications, Nature, vol. 7(1), pages 1-12, September.
    2. Salvatore Greco & Benedetto Matarazzo & Roman Słowiński, 2016. "Decision Rule Approach," International Series in Operations Research & Management Science, in: Salvatore Greco & Matthias Ehrgott & José Rui Figueira (ed.), Multiple Criteria Decision Analysis, edition 2, chapter 0, pages 497-552, Springer.
    3. T Drezner & Z Drezner & S Salhi, 2006. "A multi-objective heuristic approach for the casualty collection points location problem," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(6), pages 727-734, June.
    4. Perlack, Robert D. & Willis, Cleve E., 1980. "Multiple Objective Decision Making: Generating Techniques Or Goal Programming?," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 0(Number 1), pages 1-6, April.
    5. Miłosz Kadziński & Michał K. Tomczyk, 2017. "Interactive Evolutionary Multiple Objective Optimization for Group Decision Incorporating Value-based Preference Disaggregation Methods," Group Decision and Negotiation, Springer, vol. 26(4), pages 693-728, July.
    6. C. E. Willis & R. D. Perlack, 1980. "A Comparison of Generating Techniques and Goal Programming for Public Investment, Multiple Objective Decision Making," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(1), pages 66-74.
    7. Wang, Juite & Hwang, W.-L., 2007. "A fuzzy set approach for R&D portfolio selection using a real options valuation model," Omega, Elsevier, vol. 35(3), pages 247-257, June.
    8. Liesiö, Juuso & Mild, Pekka & Salo, Ahti, 2008. "Robust portfolio modeling with incomplete cost information and project interdependencies," European Journal of Operational Research, Elsevier, vol. 190(3), pages 679-695, November.
    9. Alec Morton & Jeffrey M. Keisler & Ahti Salo, 2016. "Multicriteria Portfolio Decision Analysis for Project Selection," International Series in Operations Research & Management Science, in: Salvatore Greco & Matthias Ehrgott & José Rui Figueira (ed.), Multiple Criteria Decision Analysis, edition 2, chapter 0, pages 1269-1298, Springer.
    10. Kangaspunta, Jussi & Liesiö, Juuso & Salo, Ahti, 2012. "Cost-efficiency analysis of weapon system portfolios," European Journal of Operational Research, Elsevier, vol. 223(1), pages 264-275.
    11. Gomes da Silva, Carlos & Climaco, Joao & Figueira, Jose, 2006. "A scatter search method for bi-criteria {0, 1}-knapsack problems," European Journal of Operational Research, Elsevier, vol. 169(2), pages 373-391, March.
    12. Mavrotas, George & Figueira, José Rui & Siskos, Eleftherios, 2015. "Robustness analysis methodology for multi-objective combinatorial optimization problems and application to project selection," Omega, Elsevier, vol. 52(C), pages 142-155.
    13. Yael Grushka-Cockayne & Bert De Reyck & Zeger Degraeve, 2008. "An Integrated Decision-Making Approach for Improving European Air Traffic Management," Management Science, INFORMS, vol. 54(8), pages 1395-1409, August.
    14. Perlack, Robert D. & Willis, Cleve E., 1980. "Multiple Objective Decision Making: Generating Techniques Or Goal Programming?," Journal of the Northeastern Agricultural Economics Council, Northeastern Agricultural and Resource Economics Association, vol. 9(1), pages 1-6, April.
    15. Liesio, Juuso & Mild, Pekka & Salo, Ahti, 2007. "Preference programming for robust portfolio modeling and project selection," European Journal of Operational Research, Elsevier, vol. 181(3), pages 1488-1505, September.
    16. Mavrotas, George & Florios, Kostas, 2013. "An improved version of the augmented epsilon-constraint method (AUGMECON2) for finding the exact Pareto set in Multi-Objective Integer Programming problems," MPRA Paper 105034, University Library of Munich, Germany.
    17. Branke, Juergen & Corrente, Salvatore & Greco, Salvatore & Słowiński, Roman & Zielniewicz, Piotr, 2016. "Using Choquet integral as preference model in interactive evolutionary multiobjective optimization," European Journal of Operational Research, Elsevier, vol. 250(3), pages 884-901.
    18. Greco, Salvatore & Matarazzo, Benedetto & Slowinski, Roman, 2001. "Rough sets theory for multicriteria decision analysis," European Journal of Operational Research, Elsevier, vol. 129(1), pages 1-47, February.
    19. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    20. Kaisa Miettinen & Jussi Hakanen & Dmitry Podkopaev, 2016. "Interactive Nonlinear Multiobjective Optimization Methods," International Series in Operations Research & Management Science, in: Salvatore Greco & Matthias Ehrgott & José Rui Figueira (ed.), Multiple Criteria Decision Analysis, edition 2, chapter 0, pages 927-976, Springer.
    21. Gao, Chao & Lu, Guanzhou & Yao, Xin & Li, Jinlong, 2017. "An iterative pseudo-gap enumeration approach for the Multidimensional Multiple-choice Knapsack Problem," European Journal of Operational Research, Elsevier, vol. 260(1), pages 1-11.
    22. Roman Słowiński & Salvatore Greco & Benedetto Matarazzo, 2014. "Rough-Set-Based Decision Support," Springer Books, in: Edmund K. Burke & Graham Kendall (ed.), Search Methodologies, edition 2, chapter 0, pages 557-609, Springer.
    23. Madjid Tavana & Kaveh Khalili-Damghani & Amir-Reza Abtahi, 2013. "A fuzzy multidimensional multiple-choice knapsack model for project portfolio selection using an evolutionary algorithm," Annals of Operations Research, Springer, vol. 206(1), pages 449-483, July.
    24. Gülseren Kiziltan & Erkut Yucaou{g}lu, 1983. "An Algorithm for Multiobjective Zero-One Linear Programming," Management Science, INFORMS, vol. 29(12), pages 1444-1453, December.
    25. Gerald G. Brown & Robert F. Dell & Alexandra M. Newman, 2004. "Optimizing Military Capital Planning," Interfaces, INFORMS, vol. 34(6), pages 415-425, December.
    26. Matthias Ehrgott & Xavier Gandibleux & Anthony Przybylski, 2016. "Exact Methods for Multi-Objective Combinatorial Optimisation," International Series in Operations Research & Management Science, in: Salvatore Greco & Matthias Ehrgott & José Rui Figueira (ed.), Multiple Criteria Decision Analysis, edition 2, chapter 0, pages 817-850, Springer.
    27. Rong, Aiying & Figueira, José Rui, 2013. "A reduction dynamic programming algorithm for the bi-objective integer knapsack problem," European Journal of Operational Research, Elsevier, vol. 231(2), pages 299-313.
    28. Kadziński, Miłosz & Tervonen, Tommi & Tomczyk, Michał K. & Dekker, Rommert, 2017. "Evaluation of multi-objective optimization approaches for solving green supply chain design problems," Omega, Elsevier, vol. 68(C), pages 168-184.
    29. Tallys H. Yunes & Dominic Napolitano & Alan Scheller-Wolf & Sridhar Tayur, 2007. "Building Efficient Product Portfolios at John Deere and Company," Operations Research, INFORMS, vol. 55(4), pages 615-629, August.
    30. Salvatore Greco & Benedetto Matarazzo & Roman Słowiński, 2010. "Dominance-based Rough Set Approach to decision under uncertainty and time preference," Annals of Operations Research, Springer, vol. 176(1), pages 41-75, April.
    31. Nikolaos Argyris & José Figueira & Alec Morton, 2011. "Identifying preferred solutions to Multi-Objective Binary Optimisation problems, with an application to the Multi-Objective Knapsack Problem," Journal of Global Optimization, Springer, vol. 49(2), pages 213-235, February.
    32. Alves, Maria Joao & Climaco, Joao, 2007. "A review of interactive methods for multiobjective integer and mixed-integer programming," European Journal of Operational Research, Elsevier, vol. 180(1), pages 99-115, July.
    33. Mavrotas, G. & Diakoulaki, D., 1998. "A branch and bound algorithm for mixed zero-one multiple objective linear programming," European Journal of Operational Research, Elsevier, vol. 107(3), pages 530-541, June.
    34. Marinakis, Vangelis & Doukas, Haris & Xidonas, Panos & Zopounidis, Constantin, 2017. "Multicriteria decision support in local energy planning: An evaluation of alternative scenarios for the Sustainable Energy Action Plan," Omega, Elsevier, vol. 69(C), pages 1-16.
    35. Montibeller, Gilberto & Franco, L. Alberto & Lord, Ewan & Iglesias, Aline, 2009. "Structuring resource allocation decisions: A framework for building multi-criteria portfolio models with area-grouped options," European Journal of Operational Research, Elsevier, vol. 199(3), pages 846-856, December.
    36. Romero, Carlos, 2001. "Extended lexicographic goal programming: a unifying approach," Omega, Elsevier, vol. 29(1), pages 63-71, February.
    37. Gomes da Silva, Carlos & Figueira, Jose & Climaco, Joao, 2007. "Integrating partial optimization with scatter search for solving bi-criteria {0, 1}-knapsack problems," European Journal of Operational Research, Elsevier, vol. 177(3), pages 1656-1677, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Barbati, M. & Figueira, J.R. & Greco, S. & Ishizaka, A. & Panaro, S., 2023. "A multiple criteria methodology for priority based portfolio selection," Socio-Economic Planning Sciences, Elsevier, vol. 88(C).
    2. Brunelli, Matteo & Corrente, Salvatore, 2024. "Modeling criteria and project interactions in portfolio decision analysis with the Choquet integral," Omega, Elsevier, vol. 126(C).
    3. Korotkov, Vladimir & Wu, Desheng, 2021. "Benchmarking project portfolios using optimality thresholds," Omega, Elsevier, vol. 99(C).
    4. Sarnataro, Michele & Barbati, Maria & Greco, Salvatore, 2021. "A portfolio approach for the selection and the timing of urban planning projects," Socio-Economic Planning Sciences, Elsevier, vol. 75(C).
    5. Mavrotas, George & Makryvelios, Evangelos, 2021. "Combining multiple criteria analysis, mathematical programming and Monte Carlo simulation to tackle uncertainty in Research and Development project portfolio selection: A case study from Greece," European Journal of Operational Research, Elsevier, vol. 291(2), pages 794-806.
    6. Guo, Mengzhuo & Zhang, Qingpeng & Liao, Xiuwu & Chen, Frank Youhua & Zeng, Daniel Dajun, 2021. "A hybrid machine learning framework for analyzing human decision-making through learning preferences," Omega, Elsevier, vol. 101(C).
    7. Sung-Shun Weng & Yang Liu & Juan Dai & Yen-Ching Chuang, 2020. "A Novel Improvement Strategy of Competency for Education for Sustainable Development (ESD) of University Teachers Based on Data Mining," Sustainability, MDPI, vol. 12(7), pages 1-18, March.
    8. Liesiö, Juuso & Kee, Taeyoung & Malo, Pekka, 2024. "Modeling project interactions in multiattribute portfolio decision analysis: Axiomatic foundations and practical implications," European Journal of Operational Research, Elsevier, vol. 316(3), pages 988-1000.
    9. Schäfer, Luca E. & Dietz, Tobias & Barbati, Maria & Figueira, José Rui & Greco, Salvatore & Ruzika, Stefan, 2021. "The binary knapsack problem with qualitative levels," European Journal of Operational Research, Elsevier, vol. 289(2), pages 508-514.
    10. Ana Sara Costa & Isabella M. Lami & Salvatore Greco & José Rui Figueira & José Borbinha, 2021. "Assigning a house for refugees: an application of a multiple criteria nominal classification method," Operational Research, Springer, vol. 21(4), pages 2651-2687, December.
    11. Julio Cezar Soares Silva & Diogo Ferreira de Lima Silva & Luciano Ferreira & Adiel Teixeira de Almeida-Filho, 2022. "A dominance-based rough set approach applied to evaluate the credit risk of sovereign bonds," 4OR, Springer, vol. 20(1), pages 139-164, March.
    12. Marques, Adriana Cavalcante & Frej, Eduarda Asfora & de Almeida, Adiel Teixeira, 2022. "Multicriteria decision support for project portfolio selection with the FITradeoff method," Omega, Elsevier, vol. 111(C).
    13. Salo, Ahti & Doumpos, Michalis & Liesiö, Juuso & Zopounidis, Constantin, 2024. "Fifty years of portfolio optimization," European Journal of Operational Research, Elsevier, vol. 318(1), pages 1-18.
    14. Zhang, Xinwei & Yan, Yong & Wang, Lilin & Wang, Yang, 2024. "A ranking approach for robust portfolio decision analysis based on multilinear portfolio utility functions and incomplete preference information," Omega, Elsevier, vol. 122(C).
    15. Smedberg, Henrik & Bandaru, Sunith, 2023. "Interactive knowledge discovery and knowledge visualization for decision support in multi-objective optimization," European Journal of Operational Research, Elsevier, vol. 306(3), pages 1311-1329.
    16. Barbati, Maria & Corrente, Salvatore & Greco, Salvatore, 2020. "A general space-time model for combinatorial optimization problems (and not only)," Omega, Elsevier, vol. 96(C).
    17. Liesiö, Juuso & Salo, Ahti & Keisler, Jeffrey M. & Morton, Alec, 2021. "Portfolio decision analysis: Recent developments and future prospects," European Journal of Operational Research, Elsevier, vol. 293(3), pages 811-825.
    18. Corrente, Salvatore & Greco, Salvatore & Matarazzo, Benedetto & Słowiński, Roman, 2024. "Explainable interactive evolutionary multiobjective optimization," Omega, Elsevier, vol. 122(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barbati, Maria & Corrente, Salvatore & Greco, Salvatore, 2020. "A general space-time model for combinatorial optimization problems (and not only)," Omega, Elsevier, vol. 96(C).
    2. Salo, Ahti & Doumpos, Michalis & Liesiö, Juuso & Zopounidis, Constantin, 2024. "Fifty years of portfolio optimization," European Journal of Operational Research, Elsevier, vol. 318(1), pages 1-18.
    3. Liesiö, Juuso & Salo, Ahti, 2012. "Scenario-based portfolio selection of investment projects with incomplete probability and utility information," European Journal of Operational Research, Elsevier, vol. 217(1), pages 162-172.
    4. Mavrotas, George & Makryvelios, Evangelos, 2021. "Combining multiple criteria analysis, mathematical programming and Monte Carlo simulation to tackle uncertainty in Research and Development project portfolio selection: A case study from Greece," European Journal of Operational Research, Elsevier, vol. 291(2), pages 794-806.
    5. Liesiö, Juuso & Punkka, Antti, 2014. "Baseline value specification and sensitivity analysis in multiattribute project portfolio selection," European Journal of Operational Research, Elsevier, vol. 237(3), pages 946-956.
    6. Selin Özpeynirci & Özgür Özpeynirci & Vincent Mousseau, 2021. "An interactive algorithm for resource allocation with balance concerns," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 43(4), pages 983-1005, December.
    7. Panos Xidonas & Haris Doukas & George Mavrotas & Olena Pechak, 2016. "Environmental corporate responsibility for investments evaluation: an alternative multi-objective programming model," Annals of Operations Research, Springer, vol. 247(2), pages 395-413, December.
    8. Zhang, Xinwei & Yan, Yong & Wang, Lilin & Wang, Yang, 2024. "A ranking approach for robust portfolio decision analysis based on multilinear portfolio utility functions and incomplete preference information," Omega, Elsevier, vol. 122(C).
    9. Salvatore Corrente & Salvatore Greco & Benedetto Matarazzo & Roman Słowiński, 2016. "Robust ordinal regression for decision under risk and uncertainty," Journal of Business Economics, Springer, vol. 86(1), pages 55-83, January.
    10. Antti Punkka & Ahti Salo, 2014. "Scale Dependence and Ranking Intervals in Additive Value Models Under Incomplete Preference Information," Decision Analysis, INFORMS, vol. 11(2), pages 83-104, June.
    11. Du, Wen Sheng & Hu, Bao Qing, 2017. "Dominance-based rough fuzzy set approach and its application to rule induction," European Journal of Operational Research, Elsevier, vol. 261(2), pages 690-703.
    12. Rong, Aiying & Figueira, José Rui, 2014. "Dynamic programming algorithms for the bi-objective integer knapsack problem," European Journal of Operational Research, Elsevier, vol. 236(1), pages 85-99.
    13. Florios, Kostas & Mavrotas, George & Diakoulaki, Danae, 2010. "Solving multiobjective, multiconstraint knapsack problems using mathematical programming and evolutionary algorithms," European Journal of Operational Research, Elsevier, vol. 203(1), pages 14-21, May.
    14. Liesiö, Juuso & Kee, Taeyoung & Malo, Pekka, 2024. "Modeling project interactions in multiattribute portfolio decision analysis: Axiomatic foundations and practical implications," European Journal of Operational Research, Elsevier, vol. 316(3), pages 988-1000.
    15. Liesiö, Juuso & Salo, Ahti & Keisler, Jeffrey M. & Morton, Alec, 2021. "Portfolio decision analysis: Recent developments and future prospects," European Journal of Operational Research, Elsevier, vol. 293(3), pages 811-825.
    16. Balderas, Fausto & Fernández, Eduardo & Cruz-Reyes, Laura & Gómez-Santillán, Claudia & Rangel-Valdez, Nelson, 2022. "Solving group multi-objective optimization problems by optimizing consensus through multi-criteria ordinal classification," European Journal of Operational Research, Elsevier, vol. 297(3), pages 1014-1029.
    17. Vilkkumaa, Eeva & Liesiö, Juuso & Salo, Ahti, 2014. "Optimal strategies for selecting project portfolios using uncertain value estimates," European Journal of Operational Research, Elsevier, vol. 233(3), pages 772-783.
    18. Zanakis, Stelios H. & Mandakovic, Tomislav & Gupta, Sushil K. & Sahay, Sundeep & Hong, Sungwan, 1995. "A review of program evaluation and fund allocation methods within the service and government sectors," Socio-Economic Planning Sciences, Elsevier, vol. 29(1), pages 59-79, March.
    19. Morton, Alec, 2014. "Aversion to health inequalities in healthcare prioritisation: A multicriteria optimisation perspective," Journal of Health Economics, Elsevier, vol. 36(C), pages 164-173.
    20. Marttunen, Mika & Haara, Arto & Hjerppe, Turo & Kurttila, Mikko & Liesiö, Juuso & Mustajoki, Jyri & Saarikoski, Heli & Tolvanen, Anne, 2023. "Parallel and comparative use of three multicriteria decision support methods in an environmental portfolio problem," European Journal of Operational Research, Elsevier, vol. 307(2), pages 842-859.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:78:y:2018:i:c:p:192-204. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.