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Determining Objective Characteristics of MCDM Methods under Uncertainty: An Exploration Study with Financial Data

Author

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  • Mahmut Baydaş

    (Faculty of Applied Sciences, Necmettin Erbakan University, Konya 42140, Turkey)

  • Dragan Pamučar

    (Department of Logistics, University of Defence in Belgrade, 11000 Belgrade, Serbia)

Abstract

A major difficulty in comparing and even choosing MCDM methods is the uncertainty of information about the consistent and unique characteristics of the results produced. The objective information content of the final scores produced by MCDM methods and their relevance to real life can give us an important idea about them. In this study, first of all, seven MCDM methods with different methodologies were applied to evaluate companies’ financial performance. Then, the obtained MCDM scores were compared using two different objective verification mechanisms. The first validation criterion is the relationship of a MCDM method to real-life rankings (share price). The second criterion is the standard deviation (SD) technique used to discover the objective information content of MCDM final scores. According to the results of this study, PROMETHEE and FUCA definitely outperform other methods in terms of both SD values and strength of correlation with reference real-life rankings. Also, FUCA is methodologically simpler than other methods. However, it produced nearly identical results as the sophisticated PROMETHEE method.

Suggested Citation

  • Mahmut Baydaş & Dragan Pamučar, 2022. "Determining Objective Characteristics of MCDM Methods under Uncertainty: An Exploration Study with Financial Data," Mathematics, MDPI, vol. 10(7), pages 1-25, March.
    • Handle: RePEc:gam:jmathe:v:10:y:2022:i:7:p:1115-:d:783845
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    References listed on IDEAS

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    1. Ahmet Kaya & Dragan Pamucar & Hasan Emin Gürler & Mehmet Ozcalici, 2024. "Determining the financial performance of the firms in the Borsa Istanbul sustainability index: integrating multi criteria decision making methods with simulation," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-44, December.

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