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Selecting the Most Desirable IT Portfolio Under Various Risk Tolerance Levels

Author

Listed:
  • Yu-Hsiang (John) Huang

    (Drake University, USA)

  • Yu-Ju (Tony) Tu

    (National Chengchi University, Taipei, Taiwan)

  • Troy J. Strader

    (Drake University, USA)

  • Michael J. Shaw

    (University of Illinois at Urbana-Champaign, USA)

  • Ramanath (Ram) Subramanyam

    (University of Illinois at Urbana-Champaign, USA)

Abstract

To better assist decision-makers (e.g., enterprise executives) in selecting the most desirable IT portfolio, this study proposes a new IT Portfolio Efficient Frontier model that incorporates the decision-maker's risk tolerance levels. The proposed model, built on portfolio optimization along with experimental design and simulation data, considers three IT portfolio scenarios: even distribution-based IT portfolios, uneven distribution-based IT portfolios, and dominant IT portfolios. Our findings show that the IT portfolio efficient frontiers derived from both an even distribution-based IT portfolio and an uneven distribution-based IT portfolio have a relatively positive relationship between IT portfolio risk and return. Our findings also indicate that if IT investments are part of a dominant IT portfolio, an inflection point of the IT portfolio efficient frontier appears under the decision-maker's medium risk tolerance level, and the most desirable IT portfolio is generated when a decision maker's risk tolerance level is medium or higher.

Suggested Citation

  • Yu-Hsiang (John) Huang & Yu-Ju (Tony) Tu & Troy J. Strader & Michael J. Shaw & Ramanath (Ram) Subramanyam, 2019. "Selecting the Most Desirable IT Portfolio Under Various Risk Tolerance Levels," Information Resources Management Journal (IRMJ), IGI Global, vol. 32(4), pages 1-19, October.
    • Handle: RePEc:igg:rmj000:v:32:y:2019:i:4:p:1-19
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