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Investment portfolio optimisation model based on stocks investment attractiveness

Abstract

Firm’s performance and potential return on investments in its stocks are determined by many factors. However, most of portfolio optimisation methods are oriented to decision- making based on stock price changes in the past. Recent financial crisis has showed that often the biggest downfall in the period of crisis is experienced by stocks, which had the biggest growth before crisis. So decision- making based on stock price tendencies analysis by ignoring fundamental factors can be inefficient. The variety of MCDM methods was briefly described and their application possibilities for portfolio optimisation were evaluated in the article. The basic portfolio selection model, based on stocks investment attractiveness, was introduced. Particular model application solutions to stocks investment attractiveness evaluation and direct portfolio optimisation stages were proposed. The pilot research was carried out, the results of which showed that proposed model enables gaining better results than comparative Markowitz and equal weights portfolios.

Keyword : investment portfolio, portfolio optimisation, stocks investment attractiveness, portfolio inter-correlation, multiple criteria decision making

How to Cite
Žilinskij, G., & Rutkauskas, A. (2012). Investment portfolio optimisation model based on stocks investment attractiveness. Business: Theory and Practice, 13(3), 242-252. https://doi.org/10.3846/btp.2012.26
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Aug 31, 2012
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