<abstract xmlns="http://www.w3.org/1999/xhtml"><bold>Research background:</bold> When selecting effective portfolios, the portfolio risk is minimized at the given expected return rate or the expected return rate is maximized with a given risk level. However, it is also worth using additional information, such as fundamental and market indicators to examine the companies’ economic and financial situation. Taking into account the chosen indicators, the initial selection of companies can be approached as a multi-criteria problem. Besides, the choice of the period from which data will be taken gives the opportunity to use non-standard tools.<bold>Purpose:</bold> The main aim of the article is to compare the profitability of effective portfolios obtained on the basis of a multi-criteria grouping of companies.<bold>Research methodology:</bold> In the study TOPSIS and FTOPSIS methods were used.<bold>Results:</bold> The results showed that the fuzzy approach could be an effective tool in obtaining more beneficial effective portfolios. Moreover, in the research, two sets of criteria differing by one indicator were used: in one of the approaches the P/E ratio was used, in the second the P/E ratio was replaced by the value of net profit per share – the analyses showed that the portfolios built on the basis of the groups for which the P/E ratio was used, had recorded better results.<bold>Novelty:</bold> The values of criterion evaluations from the considered years were treated as triangular fuzzy numbers – this enabled the use of the FTOPSIS method and a comparison of different approaches.</abstract>

Research background: When selecting effective portfolios, the portfolio risk is minimized at the given expected return rate or the expected return rate is maximized with a given risk level. However, it is also worth using additional information, such as fundamental and market indicators to examine the companies’ economic and financial situation. Taking into account the chosen indicators, the initial selection of companies can be approached as a multi-criteria problem. Besides, the choice of the period from which data will be taken gives the opportunity to use non-standard tools.Purpose: The main aim of the article is to compare the profitability of effective portfolios obtained on the basis of a multi-criteria grouping of companies.Research methodology: In the study TOPSIS and FTOPSIS methods were used.Results: The results showed that the fuzzy approach could be an effective tool in obtaining more beneficial effective portfolios. Moreover, in the research, two sets of criteria differing by one indicator were used: in one of the approaches the P/E ratio was used, in the second the P/E ratio was replaced by the value of net profit per share – the analyses showed that the portfolios built on the basis of the groups for which the P/E ratio was used, had recorded better results.Novelty: The values of criterion evaluations from the considered years were treated as triangular fuzzy numbers – this enabled the use of the FTOPSIS method and a comparison of different approaches.

Effective Portfolios – An Application of Multi-Criteria and Fuzzy Approach

Faculty of Management, Department of Statistics, Econometrics and Mathematics

Folia Oeconomica Stetinensia

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Effective Portfolios \u2013 An Application of Multi-Criteria and Fuzzy Approach"}

Research background: When selecting effective portfolios, the portfolio risk is minimized at the given expected return rate or the expected return rate is...

Effective Portfolios – An Application of Multi-Criteria and Fuzzy Approach

Published Online: Aug 06, 2019

Page range: 126 - 139

Received: Oct 19, 2018

Accepted: Mar 13, 2019

DOI: https://doi.org/10.2478/foli-2019-0009

Keywords
TOPSIS method, FTOPSIS method, fuzzy modelling, portfolio selection, effective portfolios

© 2019 Ewa Pośpiech, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Effective Portfolios – An Application of Multi-Criteria and Fuzzy Approach

Published Online: Aug 06, 2019

Page range: 126 - 139

Received: Oct 19, 2018

Accepted: Mar 13, 2019

DOI: https://doi.org/10.2478/foli-2019-0009

KeywordsTOPSIS method, FTOPSIS method, fuzzy modelling, portfolio selection, effective portfolios

© 2019 Ewa Pośpiech, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
TOPSIS method, FTOPSIS method, fuzzy modelling, portfolio selection, effective portfolios