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Effects Of Multiple Criteria On Portfolio Optimization

Author

Listed:
  • TUNCER ŞAKAR CEREN

    (Department of Industrial Engineering, Middle East Technical University, 06800, Ankara, Turkey)

  • MURAT KÖKSALAN

    (Department of Industrial Engineering, Middle East Technical University, 06800, Ankara, Turkey)

Abstract

We study the effects of considering different criteria simultaneously on portfolio optimization. Using a single-period optimization setting, we use various combinations of expected return, variance, liquidity and Conditional Value at Risk criteria. With stocks from Borsa Istanbul, we make computational studies to show the effects of these criteria on objective and decision spaces. We also consider cardinality and weight constraints and study their effects on the results. In general, we observe that considering alternative criteria results in enlarged regions in the efficient frontier that may be of interest to the decision maker. We discuss the results of our experiments and provide insights.

Suggested Citation

  • Tuncer Şakar Ceren & Murat Köksalan, 2014. "Effects Of Multiple Criteria On Portfolio Optimization," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 13(01), pages 77-99.
    • Handle: RePEc:wsi:ijitdm:v:13:y:2014:i:01:n:s0219622014500047
    DOI: 10.1142/S0219622014500047
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    References listed on IDEAS

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    1. Mr. Tonny Lybek & Mr. Abdourahmane Sarr, 2002. "Measuring Liquidity in Financial Markets," IMF Working Papers 2002/232, International Monetary Fund.
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    Cited by:

    1. Barbaros Yet & Ceren Tuncer Şakar, 2020. "Estimating criteria weight distributions in multiple criteria decision making: a Bayesian approach," Annals of Operations Research, Springer, vol. 293(2), pages 495-519, October.

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