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Methodology for making investment decisions on stock portfolio by considering the multicriteria technique AHP

Author

Listed:
  • Willmer Escobar John

    (Pontificia Universidad Javeriana)

  • Sergio Garcilazo

    (Universidad Panamericana)

Abstract

This paper presents a methodology for decision making in the Colombia stock market by using the Analytic Hierarchy Process (AHP) multicriteria technique. The problem of the research is related to the process for making investment decisions in a stock market by considering risk and profitability criteria. The research methodology includes the integration of traditional techniques for making investment decisions in equity portfolio with the AHP technique. The AHP multicriteria technique allows evaluating a finite number of choices with qualitative and quantitative criteria in a hierarchical way. The methodology has been tested on the solution of the problem of choice an equity portfolio by considering stocks of high and Medium Marketability which quoted in the Colombian stock market from December 2007 to April 2010. The computational results show the importance and efficiency of the successful integration of the traditional criteria of equity portfolio investment with the methodology AHP, for finding an appropriate balance between profitability and risk in the process of stock investment on the Colombian stock market.

Suggested Citation

  • Willmer Escobar John & Sergio Garcilazo, 2015. "Methodology for making investment decisions on stock portfolio by considering the multicriteria technique AHP," Contaduría y Administración, Accounting and Management, vol. 60(2), pages 346-366, abril-jun.
    • Handle: RePEc:nax:conyad:v:60:y:2015:i:2:p:346-366
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