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Portfolio construction with integrated CRITIC-based WASPAS method according to the financial ratios of companies traded in the ISE100 index

Author

Listed:
  • Naciye Tuba Yilmaz

    (Marmara University / Turkiye)

  • Emrah Kurt

    (Marmara University / Turkiye)

Abstract

The aim of this study is to create the best portfolio by using the financial indicators, annual returns and market multiples of the stocks of the companies traded in the ISE100 index in 2022, which provide a higher return than the CPI-adjusted ISE100 real rate of return (61.81%) announced by TURKSTAT and excluding financial institutions (banking-insurance). For this purpose, the WASPAS method, one of the multi-criteria decision-making methods, was used to rank the stocks and support the decision-making process by suggesting the investor to create a portfolio with the best companies. While selecting the companies traded in the ISE100 index, the criteria of high real returns, consistent observations and no outliers in the data set were taken into consideration. Multivariate outlier analysis was performed using Mahalonobis D2 distance. Based on the literature and expert opinions, the criteria were determined as Return on Equity, Return on Assets, Firm Value / Earnings Before Interest, Depreciation, Amortization and Taxation (EBITDA), Earnings per Share, Price Earnings Ratio (P/E), Market Value / Book Value (PD/ Book Value) and average daily return. One of the most important stages in multi-objective decision making methods is the determination of the weights of the criteria. In this study, in order to determine objective weights for each criterion, CRITIC method and CRITIC-M and D-CRITIC methods, which are new modified methods of CRITIC method, were used to assign criteria weights obtained by using the modified steps in an integrated manner. Then, the weights obtained with both methods were assigned to the WASPAS method, which is one of the multi-criteria decision-making methods to be used for ranking companies, and the method was applied. As a result, the results are compared and interpreted so that investors can create a portfolio according to which criteria they attach more importance to.

Suggested Citation

  • Naciye Tuba Yilmaz & Emrah Kurt, 2023. "Portfolio construction with integrated CRITIC-based WASPAS method according to the financial ratios of companies traded in the ISE100 index," Holistic Economics, Holistence Publications, vol. 2(2), pages 47-56.
    • Handle: RePEc:jle:jouauz:hoec2166
    DOI: 10.55094/hoec.2166
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