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Portfolio selection using analytic hierarchy process and numerical taxonomy analysis: case study of Iran

Author

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  • Fereydon Rahnamay Roodposhti
  • Mohammad Bahrani Jahromi
  • Sahar Kamalzadeh

Abstract

In spite of a large number of different models used to solve the problem of optimal portfolio selection, the problem of choosing a portfolio containing securities from different industries is still a matter of discussion among academics. Evaluating financial performance of the firm can be a crucial issue in selecting stocks. The purpose of this paper is to develop a model for evaluating the performance of firms by using financial ratios and at the same time, taking subjective judgements of decision makers into account. The proposed approach is based on analytic hierarchy process (AHP) and numerical taxonomy methods. AHP is used in determining the weights of criteria by decision makers and then rankings of the firms are determined through numerical taxonomy. The model is used for evaluating performance of firms in Tehran Stock Exchange by using their financial ratios. Then the rankings of the firms are determined according to their results.

Suggested Citation

  • Fereydon Rahnamay Roodposhti & Mohammad Bahrani Jahromi & Sahar Kamalzadeh, 2018. "Portfolio selection using analytic hierarchy process and numerical taxonomy analysis: case study of Iran," American Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 5(4), pages 394-414.
    • Handle: RePEc:ids:amerfa:v:5:y:2018:i:4:p:394-414
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    Cited by:

    1. Dongmei Jing & Mohsen Imeni & Seyyed Ahmad Edalatpanah & Alhanouf Alburaikan & Hamiden Abd El-Wahed Khalifa, 2023. "Optimal Selection of Stock Portfolios Using Multi-Criteria Decision-Making Methods," Mathematics, MDPI, vol. 11(2), pages 1-21, January.

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