Portfolio Selection using Data Envelopment Analysis with common weights

Subject Areas : Data Envelopment Analysis

A. Alinezhad ¹ , M. Zohrebandian ² , F. Dehdar ³

1 - Islamic Azad University, Qazvin Branch, Department of Industrial Engineering
2 - Islamic Azad University Karaj Branch, Department of Mathematics
3 - Islamic Azad University Qazvin Branch, Department of Industrial Engineering

Received: 2010-01-25 Accepted : 2010-02-25 Published : 2010-03-01

Keywords: DEA, Efficiency, Portfolio Selection, Common weights, MOLP,

Abstract :

The stock evaluation process plays an important role in portfolio selectionbecause it is the prerequisite for investment and directly influences on the stockallocation. This paper presents a methodology based on Data EnvelopmentAnalysis for portfolio selection, decision making units which can be stocks orother financial assets. First, DMUs efficiencies are computed based oninput/output common weights, and then the generation of a portfolio is carried outby a mathematical model. Finally the methodology is illustrated numerically onthe market of Iran stock exchange.

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