Developing a Model to Analyze Decision Maker's Preference in Portfolio Selection
Subject Areas :
Sina Shirtavani
1
,
Mahdi Homayoonfar
2
,
Keihan Azadi
3
,
Amir Daneshvar
4
1 - PhD Candidate, Department of Industrial Management, Bandar-e- Anzali International Branch, Islamic Azad University, Bandar-e-Anzali, Iran
2 -
3 -
4 - Department of Management Information Technology, Electronic Branch, Islamic Azad University, Tehran, Iran
Keywords: Preference, Decision-maker, Optimal portfolio, Stocks,
Abstract :
The goal of the present research was to provide a paradigm to derive a model of decision maker’s preference for portfolio optimization to maximize returns and minimize risks. This ex-post facto research gathered data via document-libraries methods and fell under quantitative-qualitative categories. To gather data, TadbirPardaz and DenaSahm software was used. The statistical population of the study consisted of all investment companies listed on the Tehran Stock Exchange. This research was carried out on the Stock Exchange in 2020 Summer that divided the trading days into two morning and afternoon groups. This was because the selected morning portfolio differs from the afternoon portfolio under the market signals. Also, the time interval from 2011 to 2019 was examined to investigate the investors’ decision-making accurately. Tools to analyze data were MATLAB and SPSS software. Data analysis results based on the multi-criteria decision-making technique indicated that out of the 30 stocks selected via the coefficient of closeness to the ideal solution (return maximization, e.g., profitability, growth, and liquidity indicators, and risk minimization, e.g., financial, commercial and systematic as well as market price indicators), the optimal stocks for peoples’ preference for investment included S16› S17› S19› S30. Also, the multi-criteria decision-making technique indicated that each of the main criteria of profitability, growth, risk, liquidity, and market were assigned the first, second, third, fourth, and fifth priorities, respectively, in selecting the optimal portfolio at the Tehran Stock Exchange. Genetic algorithm results suggested that the S16, S17, S19, and S30 stocks had an average maximization return of 0.956, and the optimal stocks of S25›S18›S2›S12›S26› S28›S27›S9›S16›S10›S7›S20›S30›S17›S23 had a moderate minimum calculation risk of 0.386 at 99% confidence level, which was lower than the average financial risk of 0.386. Thus, a 15-stock portfolio can be selected based on the minimum risk to choose an optimal portfolio.
