EFFECTS OF MULTIPLE CRITERIA ON PORTFOLIO OPTIMIZATION

Ceren T. S., Koksalan M.

INTERNATIONAL JOURNAL OF INFORMATION TECHNOLOGY & DECISION MAKING, vol.13, no.1, pp.77-99, 2014 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 13 Issue: 1
  • Publication Date: 2014
  • Doi Number: 10.1142/s0219622014500047
  • Journal Name: INTERNATIONAL JOURNAL OF INFORMATION TECHNOLOGY & DECISION MAKING
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus
  • Page Numbers: pp.77-99
  • Keywords: Portfolio optimization, multicriteria, liquidity, Conditional Value at Risk, cardinality constraints, weight constraints, MODELS, RISK, SELECTION, SYSTEM
  • Hacettepe University Affiliated: Yes

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 effi-cient frontier that may be of interest to the decision maker. We discuss the results of our experiments and provide insights.