Application of multi-criteria methods to compose investment portfolio optimization

Abstract

Many theories take into account the historical data of financial instruments when investigating portfolio formation. However, in order to obtain a higher return, detailed analysis is required and therefore complex valuation is required for the selection of financial instruments. The paper uses multi-criteria valuation methods for investment portfolio design, which allow to systematize all necessary factors and perform complex valuation. The SAW and TOPSIS methods avoid subjectivity without requiring the determination of significance coefficients for the factors under consideration. The investment portfolio valuation model involves the design of a system of factors, the application of a multi-criteria approach, the valuation and ranking of financial instruments in the analyzed context. In this case, the stocks selected in the SAW approach yielded better results when comparing expected profitability, risk, coefficient of variation and Sharp. The purpose of this paper is to build optimal investment portfolios by applying multi-criteria valuation techniques to SAW and TOPSIS. The following research methods have been applied in the article: analysis of scientific literature, systematization, comparison, analysis of financial reports, statistical data analysis, multicriteria methods SAW and TOPSIS, graphical representation of data.