Portfolio Selection - Science topic

This is a very strange question that looks more like a task.

Try to look for it here:

Based on the substitution of personal goals for market goals - these are more theories from the field of behavioral finance. As we say: a tit in the hand is better than a crane in the sky!

E. Atta Mills still in the process. At least by this year i hope i will get my admission

I think LINGO

Dear Elvis,

As you can see from the statement of Jyoti, the answer to your question may be not as clear cut as one could suppose. Jyoti points to La Porta et al. (2002) who argue that in the environment of better legal protection investors may be ready to pay a "security premium" on the stock prices. But, on the other hand, she says that costs of equity decrease due to reduced monitoring and auditing costs in a strong legal environment, a view that I also support. However, this contradicts the findings of La Porta et al. (2002). I think there are still lots of issues open to further research.

Paul

For simplicity, I will take only three attributes for portfolio selection. Let there be five IT companies c1,...,c5 and three attributes, namely profit, debt equity ratio and eps. We collect past data of three attributes for these five companies. You can also see this data as 5 points in three dimensional space. Out of these five points, we have to select the best one using some criterion. Thus, it became a problem of selection from a finite set. This is MADM.

Now consider the following problem. I have taken this problem just randomly to explain. It may not have any solution.

Max f1=x1+x2-x3;

Min f2=x1-2*x2+3*x3;

subject to

g1(x1,x2)=3*x1+4*x2-x3<=5;

-1<=x1<=1, 2<=x2<=3; -2<=x3<=4;

Between the specified range of x1,x2 and x3 and those points which satisfy g1 also, there are infinitely many points from which I want a point which maximizes f1 and minimizes f2 simultaneously. These points are also from three dimensional space but the number of points are infinite. We are not given limited alternatives. In this case we have infinite alternatives. This is MODM.

I hope now you might have understood the difference.

For your kind information, our paper on portfolio selection is in press. I will upload it when it is published.

Unfortunately, I was not so active in Q&A when you asked the question. So, too late answer.

Hi Seyed,

There are several software available. Find here some pointers. Best is to contact the authors if you are interested in their method.

- Rough Sets: http://www.lcb.uu.se/tools/rosetta/#functionality

- FlowSort  sorting method (based on Promethee methodology): www.smart-picker.com  --> there is a trial version and also research licences

- Tomaso method (http://public.telecom-bretagne.eu/~pmeyer//software/tomaso/tomaso_tutorial.html)

- SMAA (http://www.inescc.pt/~ewgmcda/SW_CSMAA.pdf)

- FINCLASS (Multicriteria Decision Support for Financial Classification Problems) (in Newsletter, Series 3, No. 3, Spring 2001): http://www.cs.put.poznan.pl/ewgmcda/pdf/SWFinclass.pdf

Other references:

Best wishes,

Philippe

There are two things that I would advise is:

a)As Sylantyev mentioned the time period is important due to crisis post-crisis period. you should test the data to see if the features correlate to the time periods. Also, see if shorter time periods have an effect on the data (spot cyclical or specific time periods which might bias the data)

b) At the stage that you are mentioning right now it is better to test several algorithms and not just one. Unless you have previous literature that already has done the work for you, I would suggest that you try several methods.

In fact, I meant

But all papers of this page are worth looking at: