EFFECTS OF MULTIPLE CRITERIA ON PORTFOLIO OPTIMIZATION

Tuncer Şakar Ceren () and Murat Köksalan
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Tuncer Şakar Ceren: Department of Industrial Engineering, Middle East Technical University, 06800, Ankara, Turkey
Murat Köksalan: Department of Industrial Engineering, Middle East Technical University, 06800, Ankara, Turkey

International Journal of Information Technology & Decision Making (IJITDM), 2014, vol. 13, issue 01, 77-99

Abstract: We study the effects of considering different criteria simultaneously on portfolio optimization. Using a single-period optimization setting, we use various combinations of expected return, variance, liquidity and Conditional Value at Risk criteria. With stocks from Borsa Istanbul, we make computational studies to show the effects of these criteria on objective and decision spaces. We also consider cardinality and weight constraints and study their effects on the results. In general, we observe that considering alternative criteria results in enlarged regions in the efficient frontier that may be of interest to the decision maker. We discuss the results of our experiments and provide insights.

Keywords: Portfolio optimization; multicriteria; liquidity; Conditional Value at Risk; cardinality constraints; weight constraints (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0219622014500047

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