Hybrid Portfolio Optimization using Analytic Hierarchy Process (AHP), Combined Compromise Solution (CoCoSo) and Markowitz Model (Case study of Tehran Stock Exchange)

Subject Areas : Journal of Investment Knowledge

Nasimeh Abdi ¹ , mehdi Moradzadeh Fard ² , Hamid Ahmadzadeh ³ , Mahmoud Khoddam ⁴

1 - Ph.D. Student in Financial Engineering, Department of Financial Management, Karaj Branch, Islamic Azad University, Karaj, Iran
2 - Associate Professor, Department of Accounting, Karaj Branch, Islamic Azad University, Karaj, Iran
3 - Assistant professor Department of Accounting, Karaj Branch, Islamic Azad University, Karaj, Iran
4 - Assistant professor, Department of Financial Management, Karaj Branch, Islamic Azad University, Karaj, Iran

Received: 2021-11-05 Accepted : 2022-02-06 Published : 2023-12-22

Keywords: Combined Compromise Solution (CoCoSo), portfolio optimization, Markowitz Model, Decision making, Analytic Hierarchy Process (AHP),

Abstract :

Using effective and efficient criteria in choosing the investment portfolio can provide the most profitability for individual and institutional investors. Therefore, it seems necessary to choose a hybrid method to create a portfolio that shows better performance. The purpose of this study is to provide a model that can combine Multi-criteria decision-making techniques and Markowitz's mean-variance model, in different periods, to create an optimal portfolio that maximizes shareholder profits. The proposed model was implemented in three steps. In the first step, using the AHP technique, utilizing the opinion of experts, comparing different decision options based on the fundamental and technical criteria effective in decision making and prioritizing the mentioned criteria during the period from June 2016 to June 2021, among industries Activists in the Tehran Stock Exchange were selected as top industries. In the second step, from selected industries, three portfolios with one-month, six-month, and one-year periods were selected using the CoCoSo technique. In the third step, using the Markowitz model in the expressed time period, optimal portfolios were created on the efficient frontier. The results of this study showed that this hybrid proposed model will give more returns to investors according to the risk in different time periods.

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