Abstract
Multi-criteria decision making (MCDM) methods have evolved for various types of applications. In the past, even small variations to existing methods have led to the creation of new avenues for research. Thus, in this study, we review the MCDM methods in investment management and examine the advantages and disadvantages of these methods in a risk environment. In addition, we study the effectiveness of investment projects using these methods. The analysis of MCDM methods performed in this study provides a guide for the use of these methods, especially the ones based on interval data, in investment project analysis. Furthermore, we propose a combination of multi-criterial selection and interval preferences to evaluate investment projects. Our method improves on the method of calculating economic efficiency based on a one-dimensional criterion and sensitivity analysis, though our proposal involves complicated calculations.
Highlights
Investment analysis is a commonly performed step before the development or introduction of new, more advanced forms or methods of management into broad practice
Several attempts have been made to develop Multi-Criteria Approach (MCA) methods that retain the strengths of the Analytic Hierarchy Process (AHP) while addressing some of the weaknesses; for example, MCA method can be considered as a complete aggregation method of the additive type
Assuming that the interest rate r is a random variable for which the probability of a random event can be found, net present value (NPV) (r, t) > 0, P (NPV (r, t) > 0) = P (r < internal rate of return (IRR)) = F (IRR)
Summary
Investment analysis is a commonly performed step before the development or introduction of new, more advanced forms or methods of management into broad practice. Several attempts have been made to develop Multi-Criteria Approach (MCA) methods that retain the strengths of the Analytic Hierarchy Process (AHP) while addressing some of the weaknesses; for example, MCA method can be considered as a complete aggregation method of the additive type The problem with such an aggregation is that we obtain the same result with a different ordering by different indicators, in which case, we lose some information. The LCA analysts are interested in forecasting future materials/costs on a regional or global scale as a function of differences in economic growth and regulatory scenarios These abovementioned approaches can reflect the nature or consequences of investments in a business organization
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