Abstract
The topic of this article is inspired by the problem faced by many people around the world: investment portfolio selection. Apart from the standardly used methods and approaches, non-traditional multiple objective programming methods can also be significant, providing even more efficient support for making a satisfactory investment decision. A more suitable method for this purpose seems to be a concept working with an interactive procedure through the portfolio that may gradually be adapted to the investor’s preferences. Such a method is clearly the Step Method (STEM) or the more suitable improved version KSU-STEM. This method is still burdened by partial algorithmic weaknesses or methodical aspects to think about, but not as much as the other methods. The potentially stronger application power of the KSU-STEM concept motivates its revision. Firstly, an unnecessarily negative principle to determine the basal value of the objectives is revised. Further, the fuzzy goals are specified, which leads to a reformulation of the revealed defuzzified multi-objective model. Finally, the imperfect re-setting of the weights (importance) of unsatisfactory objectives is revealed. Thus, the alternative approaches are proposed. The interventions to the algorithm are empirically verified through a real-life selection of a portfolio of the open unit trusts offered by CONSEQ Investment Management traded on the Czech capital market. This application confirms a significant supporting power of the revised multiple objective programming approach KSU-STEM in a portfolio-making process.
Highlights
Real-life decision making can be a very difficult process
Interactive multiple objective programming methods have been evolving for the last few decades; below, we provide a more detailed overview
The more general mission of this paper is to demonstrate a significant application power of multiple objective programming methods in the portfolio selection problems in order to use them more in this area
Summary
Real-life decision making can be a very difficult process. we should have some supporting tools to make this process easier and more effective. An example of usually a complex decision-making process is investment portfolio selection, which an increasing number of people over the world are facing as they try to valorize their free funds. The portfolio is especially made on the basis of human intuition, personal mood, or the mood of the crown on the capital market. Such a decision can be supported by a well-known psychological analysis developed by Le Bon [1]. Portfolio selection reflecting only some qualitative/quantitative information or one-criterion perspective is too simplifying
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