Title: Portfolio selection using analytic hierarchy process and numerical taxonomy analysis: case study of Iran

Authors: Fereydon Rahnamay Roodposhti; Mohammad Bahrani Jahromi; Sahar Kamalzadeh

Addresses: Department of Management, Faculty of Management and Economics, Islamic Azad University, Science and Research Branch, Tehran, Iran ' Finance Department, Faculty of Management, The University of Tehran, Tehran, Iran ' Finance Department, Faculty of Management, The University of Tehran, Tehran, Iran

Abstract: In spite of a large number of different models used to solve the problem of optimal portfolio selection, the problem of choosing a portfolio containing securities from different industries is still a matter of discussion among academics. Evaluating financial performance of the firm can be a crucial issue in selecting stocks. The purpose of this paper is to develop a model for evaluating the performance of firms by using financial ratios and at the same time, taking subjective judgements of decision makers into account. The proposed approach is based on analytic hierarchy process (AHP) and numerical taxonomy methods. AHP is used in determining the weights of criteria by decision makers and then rankings of the firms are determined through numerical taxonomy. The model is used for evaluating performance of firms in Tehran Stock Exchange by using their financial ratios. Then the rankings of the firms are determined according to their results.

Keywords: multiple criteria analysis; rating stocks; analytic hierarchy process; AHP; taxonomy; Iran.

DOI: 10.1504/AJFA.2018.093638

American Journal of Finance and Accounting, 2018 Vol.5 No.4, pp.394 - 414

Received: 09 Feb 2018
Accepted: 08 Apr 2018

Published online: 16 Jul 2018 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article