A fuzzy MCDM approach for stock selection

Tsao C-T ()
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Tsao C-T: National Pingtung Institute of Commerce

Journal of the Operational Research Society, 2006, vol. 57, issue 11, 1341-1352

Abstract: Abstract A fuzzy MCDM approach is applied to the stock selection problem, where the proposed approach can deal with qualitative information in addition to quantitative information. A hierarchy of major–sub criteria is then established to reduce the dependence between criteria. The ratings of alternatives versus qualitative sub-criteria and the weights of major- and sub-criteria are assessed in linguistic terms represented by fuzzy numbers. Each sub-criterion is in a benefit, cost, or balanced nature. New standardization methods for fuzzy numbers in the cost and balanced nature are presented. The algorithms of membership functions of the final aggregation are completely developed instead of approximation. The final aggregations in fuzzy numbers are then defuzzified to crisp values in order to rank the performance of alternatives. Moreover, the ratio of market price to performance (PP) is suggested to filter the over/under-pricing of alternatives. A set of buying/selling strategies are recommended according to the performance and PP. An empirical example then demonstrates the processing of the proposed approach.

Keywords: finance; investment; fuzzy sets; decision analysis (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1057/palgrave.jors.2602139

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