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Analysis of the Capital Market Via Stochastic Dominance and Multi-Criteria Interactive Method
[Analýza kapitálového trhu pomocí stochastické dominance a vícekriteriální interaktivní metody]

Author

Listed:
  • Adam Borovička

Abstract

Two levels can be identified in the article. The first one is related to a theoretical introduction to the known stochastic dominance approach and the interactive multi-objective programming method; in the second we apply the aforesaid quantitative approaches to making an "optimal" portfolio structure of shares funds. We use the draft of stochastic dominance for a reduction in a relatively huge set of investment opportunities. The application of the stochastic dominance principle is determined by the stochastic character of the studied problem. The yield rate of shares funds is stated as a random variable. We also apply the Monte Carlo method in the investment decision-making procedure. For finding an "optimal" portfolio form, we use the interactive multi-criteria programming method, the computational algorithm of which is based on maximization of positive deviation from aspiration levels of separate objective functions (criteria). After all the procedures, including successive revision of solutions offered by analysts according to decision-maker preferences, we obtain a final portfolio form of shares funds.

Suggested Citation

  • Adam Borovička, 2013. "Analysis of the Capital Market Via Stochastic Dominance and Multi-Criteria Interactive Method [Analýza kapitálového trhu pomocí stochastické dominance a vícekriteriální interaktivní metody]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2013(1), pages 26-45.
    • Handle: RePEc:prg:jnlaop:v:2013:y:2013:i:1:id:391
    DOI: 10.18267/j.aop.391
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    More about this item

    Keywords

    portfolio; decision-making; stochastic dominance;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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