A New Portfolio Selection Method Based on Interval Data
Mădălina Ecaterina ANDREICA1, Ion DOBRE1, Mugurel Ionuţ ANDREICA2, Cornel RESTEANU3
1 Bucharest Academy of Economic Studies, 010552, Romania
2 Politehnica University of Bucharest, 060032, Romania
3 I C I Bucharest
(National Institute for R & D in Informatics)
8-10 Averescu Blvd.
011455 Bucharest 1, Romania
Abstract: The aim of this paper is to extend a portfolio selection method based on MADM techniques for the case of interval data. In order to highlight the procedure of the proposed algorithm an example of product portfolio selection for a leasing company has been analyzed. Several numerical simulations have been performed in order to illustrate our interval data method.
Keywords: Multi-Attribute Decision Making, Imprecise Data, Shannon’s Entropy, Portfolio Selection, Leasing.
CITE THIS PAPER AS:
Mădălina Ecaterina ANDREICA, Ion DOBRE, Mugurel Ionuţ ANDREICA, Cornel RESTEANU, A New Portfolio Selection Method Based on Interval Data, Studies in Informatics and Control, ISSN 1220-1766, vol. 19 (3), pp. 253-262, 2010.
The process of decision making is both a permanent necessity and a challenge in many fields, like risk management, banking, operational research and many others. The importance of the decision making process has been confirmed by the large number of publications which develop efficient decision making techniques. These techniques can be classified into several broad categories, such as those handling certain and complete information, those using uncertain data and objectives, and those based on risk assessment [3, 11]. Some of the best known decision making optimization methods are multi-attribute and multi-objective decision making [2, 7, 10], fuzzy decision rules  and dynamic programming.
Multi-Attribute Decision Making (MADM) refers to making preference decisions over the available alternatives that are characterized by multiple, generally conflicting attributes. In traditional MADM problems, most of the input variables are assumed to be crisp data. However, in most cases it is quite difficult to determine precisely the exact value of the attributes under incomplete information and uncertainty and as a result of this, their values are considered as intervals. Therefore, the aim of this paper is to extend a portfolio selection method based on MADM methods, for the case of interval data.
Finally, an example of product portfolio selection for a leasing company is shown in order to highlight the procedure of the proposed algorithm.
The paper is structured as follows. Section 2 presents the portfolio selection method for interval data, for which a numerical example is then given in Section 3, followed by some numerical simulations in Section 4, while Section 5 concludes.
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