AHP–TOPSIS Methodology for Stock Portfolio Investments

Jaime Alberto Vásquez, John Willmer Escobar and Diego Fernando Manotas
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Jaime Alberto Vásquez: Department of Economic Sciences, Universidad del Valle, Cali 760001, Colombia
John Willmer Escobar: Department of Accounting and Finance, Universidad del Valle, Cali 760001, Colombia
Diego Fernando Manotas: School of Industrial Engineering, Universidad del Valle, Cali 760001, Colombia

Risks, 2021, vol. 10, issue 1, 1-20

Abstract: This paper presents a methodology for making decisions in the stock market using the AHP-TOPSIS multi-criteria technique. The problem is related to the stock market’s investment process considering the criteria of liquidity, risk, and profitability. The proposed methodology includes integrating economic and financial theories of investment in equity portfolios with the AHP-TOPSIS multi-criteria technique, which allows for evaluating a finite number of alternatives hierarchically under qualitative and quantitative criteria. The methodology has been tested in a real case of selecting a portfolio of high and medium marketability stocks for the Colombian market from April 2012 to April 2017. The computational results show the importance and efficiency of successfully integrating traditional equity portfolio investment criteria and multi-criteria methodologies to find an appropriate balance between profitability and risk in the investment decision-making process in shares in the Colombian stock market. The proposed methodology could be applied to other emerging markets, similar to Colombia.

Keywords: stock portfolio; multi-criteria method; hierarchical analytics process; order of preferences; stock market (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2021
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