Abstract
The purpose of stock portfolio selection is how to allocate the capital to a large number of stocks in order to bring a most profitable return for investors. In most of past literatures, experts considered the portfolio of selection problem only based on past crisp or quantitative data. However, many qualitative and quantitative factors will influence the stock portfolio selection in real investment situation. It is very important for experts or decision-makers to use their experience or knowledge to predict the performance of each stock and make a stock portfolio. Because of the knowledge, experience, and background of each expert are different and vague, different types of 2-tuple linguistic variable are suitable used to express experts' opinions for the performance evaluation of each stock with respect to criteria. According to the linguistic evaluations of experts, the linguistic TOPSIS and linguistic ELECTRE methods are combined to present a new decision-making method for dealing with stock selection problems in this paper. Once the investment set has been determined, the risk preferences of investor are considered to calculate the investment ratio of each stock in the investment set. Finally, an example is implemented to demonstrate the practicability of the proposed method.
Highlights
The purpose of stock portfolio selection is how to allocate the capital to a large number of stocks in order to bring a most profitable return for investors 1
Different types of 2-tuple linguistic variables are applied to express the subjective judgment of each expert
Expert can express his opinion by different types of 2-tuple linguistic variables
Summary
The purpose of stock portfolio selection is how to allocate the capital to a large number of stocks in order to bring a most profitable return for investors 1. In the portfolio selection problem the decision maker considers simultaneously conflicting objectives such as rate of return, liquidity, and risk. The Elimination et choice in Translating to Reality ELECTRE method is a highly developed multicriteria analysis model which takes into account the uncertainty and vagueness in the decision process 14. It is based on the axiom of partial comparability and it can simplify the evaluation procedure of alternative selection. Decision makers would use the different 2-tuple linguistic variables based on their knowledge or experiences to express their opinions. The conclusion is discussed at the end of this paper
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