Portfolio optimization using a hybrid of fuzzy ANP, VIKOR and TOPSIS

Abstract

One of the primary questions in asset management is to find good combinations of different assets and this has been an interesting area of research for over half a century. The proposed model of this paper uses decision makers' feedbacks based on multiple criteria decision making technique to find an appropriate portfolio. We first select some important financial criteria and then using decision makers' opinions and by implementation of some fuzzy analytical network analysis we find appropriate weights of the asset. The proposed model uses two multiple criteria techniques namely TOPSIS and VIKOR and the model is examined for some real-world data from Tehran Stock Exchange. The results of the implementation of the proposed model have been examined against Markowitz traditional model. The preliminary results indicate that the proposed model of this paper performs reasonably well compared with alternative method.

A Parametric Sharpe Ratio Optimization Approach for Fuzzy Portfolio Selection Problem

“…Hasuike and Katagiri [25] considered a random fuzzy portfolio selection problem with general distributions and transformed it into the deterministic standard mathematical programming problem by introducing Sharpe ratio and fuzzy goals. Raei and Jahromi [26] proposed a model based on multiple criteria decision making and then by implementation of fuzzy analytical network analysis found appropriate weights of the asset. To measure the efficiency of the proposed model, the Sharpe ratio was computed for performance evaluation of the optimal portfolio.…”

Multi Criteria Analysis for Selecting Sharia Capital Market Management Investment Using ANP

“…This technique also uses the VIKOR method to sort and select the best alternative for investing in the capital market. Raei and Jahromi (2012) in their research proposed a combination of fuzzy ANP, VIKOR and TOPSIS techniques to obtain optimal investment portfolios. The model proposed in this study uses feedback from decision makers based on multiple criteria decision-making techniques.…”

Effective Portfolios – An Application of Multi-Criteria and Fuzzy Approach

“…In the literature we may find many works in which multi-criteria methods taking into account the fuzzy approach are used to assess companies or to build a portfolio. Among many of them we can mention works: -in which the applicability of FTOPSIS in optimal portfolio selection is researched (Ece, Uludag, 2017), -with the proposal of a hybrid approach for asset allocation with simultaneous consideration of suitability and optimality -we can find there the application of a cluster analysis, the AHP method and a fuzzy multi-objective linear programming model for portfolio selection (Gupta, Inuiguchi, Mehlawat, 2011), -where in the stock exchange market analyses a hybrid fuzzy decision making procedure was applied -among others, fuzzy AHP and fuzzy TOPSIS methods are used (Kazemi, Sarrafha, Bedel, 2014), -which deals with multi-period portfolio selection problems in a fuzzy environmentwhere a TOPSIS-compromised programming approach is designed (Liu, Zhang, Xu, 2012), -where for portfolio selection a behavioural construct of suitability is used to develop a multi-criteria decision making framework -with the use of the AHP method and fuzzy multiple criteria decision making methods (Mehlawat, 2013), -where for portfolio optimizations, among others, trapezoidal fuzzy numbers, SAW and TOPSIS methods were used (Nguyen, Gordon-Brown, 2012), -in which selected fuzzy multi-criteria methods (ANP, VIKOR, TOPSIS) are used for portfolio optimization (Raei, Bahrani Jahromi, 2012), -which presents a fuzzy approach to evaluate the investment values of stocks, where the ratings of stocks are assessed in linguistic values represented by fuzzy numbers (Tsao, 2003).…”