The two-stage Approach for Stock Selection and Portfolio Composition (Enriched Promethee Method)

Subject Areas : Financial Knowledge of Securities Analysis

Saeed Khodamoradi ¹ , Mahdi Bashiri ² , Hossein Reisi ³

1 - استادیار گروه مدیریت صنعتی دانشگاه شاهد
2 - دانشیار گروه مهندسی صنایع دانشگاه شاهد
3 - دانشجوی کارشناسی ارشد مدیریت بازرگانی گرایش مالی دانشگاه شاهد

Received: 2014-09-23 Accepted : 2014-11-11 Published : 2015-06-22

Keywords: portfolio selection, multi-criteria, Analytic Network Process, promethee&#x0D, &#x0D, technique, Ranking,

Abstract :

Deciding about portfolio selection and composition are the main challenge ofinvestment institutions. The nature of analysis and effective criteria in industry andcompany are different. They should rank the industry and companies options with regardto multiple and conflict criteria that they have different weights and priorities. This articleseeks to provide two-stage approach for stock selection and portfolio composition. Weenriched promethee (compensatory MCDM method) by weight of criteria. Then we usedit in intended approach. The expert opinions and objective data used to criteria ranking.An ANP was used to determining weight of criteria that merge in promethee method.After designing we tried to validate our approach with real data. The results show wehave 7% (simple mode) and 11% (enriched mode) return more than actual performance.Using of Porter five forces analysis for indentifying and verify industry criteria, toinclude some indices from corporate governance and technical analysis, weighting thecriteria and integrate them in the promethee are our research novelty.