Selecting the Most Desirable IT Portfolio Under Various Risk Tolerance Levels

Yu-Hsiang (John) Huang, Yu-Ju (Tony) Tu, Troy J. Strader, Michael J. Shaw and Ramanath (Ram) Subramanyam
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Yu-Hsiang (John) Huang: Drake University, USA
Yu-Ju (Tony) Tu: National Chengchi University, Taipei, Taiwan
Troy J. Strader: Drake University, USA
Michael J. Shaw: University of Illinois at Urbana-Champaign, USA
Ramanath (Ram) Subramanyam: University of Illinois at Urbana-Champaign, USA

Information Resources Management Journal (IRMJ), 2019, vol. 32, issue 4, 1-19

Abstract: To better assist decision-makers (e.g., enterprise executives) in selecting the most desirable IT portfolio, this study proposes a new IT Portfolio Efficient Frontier model that incorporates the decision-maker's risk tolerance levels. The proposed model, built on portfolio optimization along with experimental design and simulation data, considers three IT portfolio scenarios: even distribution-based IT portfolios, uneven distribution-based IT portfolios, and dominant IT portfolios. Our findings show that the IT portfolio efficient frontiers derived from both an even distribution-based IT portfolio and an uneven distribution-based IT portfolio have a relatively positive relationship between IT portfolio risk and return. Our findings also indicate that if IT investments are part of a dominant IT portfolio, an inflection point of the IT portfolio efficient frontier appears under the decision-maker's medium risk tolerance level, and the most desirable IT portfolio is generated when a decision maker's risk tolerance level is medium or higher.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:igg:rmj000:v:32:y:2019:i:4:p:1-19

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