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Evaluating stocks in the presence of multiple criteria

Author

Listed:
  • Panagiotis Xidonas
  • George Mavrotas
  • John Psarras

Abstract

A fundamental principle of modern portfolio theory is that portfolio selection decisions are generally made using two criteria, corresponding to the first two moments of return distributions, namely the expected return and portfolio variance. One criticism over this theory, which has often been addressed both by practitioners and academics, is that it fails to embody all the decision maker's (DM's) objectives, through the various stages of the decision process. The aim of this paper is to present an alternative methodological approach for modelling one of the most crucial phases of the portfolio management process, the security evaluation phase. The main characteristic of the proposed approach is that it fully takes into account the inherent multidimensional nature of the problem, while allowing the DM to incorporate his preferences in the decision process. The validity of the proposed approach is tested through an illustrative application in Athens Stock Exchange.

Suggested Citation

  • Panagiotis Xidonas & George Mavrotas & John Psarras, 2010. "Evaluating stocks in the presence of multiple criteria," International Journal of Information and Decision Sciences, Inderscience Enterprises Ltd, vol. 2(1), pages 87-111.
    • Handle: RePEc:ids:ijidsc:v:2:y:2010:i:1:p:87-111
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