Application of multi-criteria methods for the formation of an investment portfolio

Abstract

In recent years, more and more people are interested in investing, but many face the problem of stock selection. One of the topical topics of modern economics and management science is the problem of investment portfolio allocation. Therefore, it is necessary to find a suitable method for creating an investment portfolio. The main goal of this scientific article is to create an investment portfolio using multi-criteria evaluation methods. Traditional methods of portfolio compilation only take into account risk and return criteria based on historical data, which does not allow a comprehensive assessment of the suitability of company shares for an investment portfolio, therefore, in this study, according to the proposed methods, financial instruments are evaluated using more criteria. Many authors compare only two multicriteria methods with each other, but this scientific article examines four methods, which allows to find the most suitable of them. For this study, multi-criteria evaluation methods – COPRAS, SAW, EDAS and TOPSIS – are used to compile the investment portfolio. Eighteen stocks of companies listed on the NYSE market were evaluated according to 10 criteria, according to which multi-criteria methods were applied to create the best and worst decisions. Using the resulting data, all stocks were assigned a rating score, which was used to select stocks for an ideal portfolio, with return and risk levels used to compare portfolios.