Combinatorial Portfolio Selection with the ELECTRE III method: Case study of the Stock Exchange of Thailand (SET)

Abstract

Abstract-Various techniques of portfolio selection are applied to interpret the status of the market and predict the market's future trend, but they are not beneficial to small investors because these techniques should be administered by an expert. In addition, these techniques desire accumulation of data about the market and complicated calculations, which is too much effort for individual small investors. Therefore, portfolio selection with two significant financial ratios using the ELECTRE III method is proposed for these investors to make trading decisions. In order to demonstrate the effectiveness of this new method, it is compared to the situation where a fix percentage allocation existed and data was collected from the Stock Exchange of Thailand (SET).

Portfolio selection: a fuzzy-ANP approach

“…In the past couple decades, studies of portfolio selection have developed complex mathematical models to consider additional real-world factors. Chunhachinda et al (1997) Sample Reference Factor Analysis/PCA Price-to-book ratio (P/B) Gold and Lebowitz (1999) N o Thakur et al (2018) N o Hilliard and Zhang (2015) N o Palazzo et al (2018) N o Mohapatra and Misra (2019) N o Price-to-earnings ratio (P/E) Zargham and Sayeh (1999) N o Thakur et al (2018) N o Pattipeilohy and Koesrindartoto (2015) N o Thakur et al (2016) N o Sharma and Mehra (2017) N o Net profit margin Huang (2012) N o Silva et al (2015) N o Boonjing and Boongasame (2016) N o Jeong and Kim (2019) N o Ece and Uludag (2017) N o Systematic risk Treynor and Black (1973) N o Li et al (2019a, b) N o Aliu et al (2017) N o Wang et al (2018) N o Guerard Jr et al (2015) N o Earnings per share Hurson and Zopounidis (1997) N o Messaoudi et al (2017) N o Guerard Jr et al 2015N o Thakur et al (2018) N o Vezmelai et al (2015) N o Revenue growth rate Lim et al (2014) N o Silva et al (2015) N o Najafi and Pourahmadi (2016) N o Du et al (2016) N o Maier et al (2016) N o Net profit rate Han et al (2004) N o Silva et al (2015) N o Vezmelai et al (2015) N o Guo et al (2016) N o Lee and Moon (2017) N o Return on asset (ROA) Rachev et al (2005) N o Mashayekhi and Omrani (...…”

Ranking jerárquico del índice Dow Jones usando el método ELECTRE-III

“…Aunque estas investigaciones intentan interpretar el estado del mercado y predecir la tendencia futura del mercado, no son beneficiosas para los pequeños inversores porque estas técnicas requieren un cierto grado de experiencia. Además, estas técnicas tampoco pueden ayudar a los inversores a comparar negocios en múltiples criterios de ambigüedad (Boonjing & Boongasame, 2016).…”

“…Vezmelai, Lashgari & Keyghobadi (2015) seleccionan y clasifican a 20 compañías listadas en 2011 en la bolsa de valores de Teherán (TSE) con el método ELECTRE III, en comparación con la clasificación ofrecida por el TSE. Boonjing & Boongasame (2016) proponen una selección de cartera combinatoria con el método ELECTRE III para apoyar a los pequeños inversores en su decisión de inversión. Xidonas et al (2009) aplicaron ELECTRE III con la finalidad de clasificar en 8 distintas clases correspondiente a cada sector o actividad industrial para integrar un portafolio de inversión de Pareto.…”

Spectral opportunity selection based on the hybrid algorithm AHP-ELECTRE

“…This method facilitates the comparisons between alternative schemes through the use of a pondered sum technique. It also uses several mathematical functions to indicate the dominant degree of an alternative over the remaining options [20]. The procedure is based on a decision matrix and an overclassification relation is used in order to deliver an improvement matrix.…”