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Structuring Portfolio Selection Criteria for Interactive Decision Support

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  • Hurson Ch.
  • Ricci - Xella N.

Abstract

A trichotomic evaluation system for portfolio selection support is proposed through this paper. The methodology works in two phases: First, Arbitrage Pricing Theory (APT) is used to estimate portfolios’ expected return and to identify influence factors and risk origins. ELECTRE TRI method aggregates all the common risk criteria into a unique one, which is more understandable by real investors or portfolio managers. By this way each alternative portfolio is evaluated on three criteria only including return, residual risk and common risk. In the second phase, the MINORA multicriteria interactive system based on preference disaggregation is proposed to select attractive portfolios. The whole methodological framework is illustrated by an application to the French stock market.

Suggested Citation

  • Hurson Ch. & Ricci - Xella N., 2002. "Structuring Portfolio Selection Criteria for Interactive Decision Support," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 69-94, January -.
    • Handle: RePEc:ers:journl:v:v:y:2002:i:1-2:p:69-94
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    References listed on IDEAS

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    1. Roll, Richard & Ross, Stephen A, 1980. "An Empirical Investigation of the Arbitrage Pricing Theory," Journal of Finance, American Finance Association, vol. 35(5), pages 1073-1103, December.
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    5. Gibbons, Michael R & Ross, Stephen A & Shanken, Jay, 1989. "A Test of the Efficiency of a Given Portfolio," Econometrica, Econometric Society, vol. 57(5), pages 1121-1152, September.
    6. Chen, Nai-fu, 1983. "Some Empirical Tests of the Theory of Arbitrage Pricing," Journal of Finance, American Finance Association, vol. 38(5), pages 1393-1414, December.
    7. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
    8. Roy, B., 1987. "Meaning and validity of interactive procedures as tools for decision making," European Journal of Operational Research, Elsevier, vol. 31(3), pages 297-303, September.
    9. Dhrymes, Phoebus J & Friend, Irwin & Gultekin, N Bulent, 1984. "A Critical Reexamination of the Empirical Evidence on the Arbitrage Pricing Theory," Journal of Finance, American Finance Association, vol. 39(2), pages 323-346, June.
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    Cited by:

    1. Mir Seyed Mohammad Mohsen Emamat & Caroline Maria de Miranda Mota & Mohammad Reza Mehregan & Mohammad Reza Sadeghi Moghadam & Philippe Nemery, 2022. "Using ELECTRE-TRI and FlowSort methods in a stock portfolio selection context," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-35, December.
    2. Masoud Rahiminezhad Galankashi & Farimah Mokhatab Rafiei & Maryam Ghezelbash, 2020. "Portfolio selection: a fuzzy-ANP approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-34, December.
    3. Mohsen Mortazavi, 2023. "Selecting Sustainable Optimal Stock by Using Multi-Criteria Fuzzy Decision-Making Approaches Based on the Development of the Gordon Model: A case study of the Toronto Stock Exchange," Papers 2304.13818, arXiv.org.

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