Combined MCDM techniques for exploring stock selection based on Gordon model

  • Authors:

  • Wen-Shiung Lee;Gwo-Hshiung Tzeng;Jyh-Liang Guan;Kuo-Ting Chien;Juan-Ming Huang

  • Affiliations:

  • Department of Business and Entrepreneurial Management, Kainan University, No.1, Kainan Road, Luzhu Shiang, Taoyuan 33857, Taiwan;Department of Business and Entrepreneurial Management, Kainan University, No.1, Kainan Road, Luzhu Shiang, Taoyuan 33857, Taiwan;Department of Business and Entrepreneurial Management, Kainan University, No.1, Kainan Road, Luzhu Shiang, Taoyuan 33857, Taiwan;Department of Business and Entrepreneurial Management, Kainan University, No.1, Kainan Road, Luzhu Shiang, Taoyuan 33857, Taiwan;Department of Business and Entrepreneurial Management, Kainan University, No.1, Kainan Road, Luzhu Shiang, Taoyuan 33857, Taiwan

  • Venue:
  • Expert Systems with Applications: An International Journal
  • Year:
  • 2009

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Abstract

Basing on the Gordon model perspective and applying multiple criteria decision making (MCDM), this research explores the influential factors and relative weight of dividend, discount rate, and dividend growth rate. The purpose is to establish an investment decision model and provides investors with a reference/selection of stocks most suitable for investing effects to achieve the greatest returns. Taking full consideration of the interrelation effect among variables of the decision model, this paper introduced analytical network process (ANP) and examined leading electronics companies spanning the hottest sectors of lens, solar, and handset by experts. Empirical findings indicated that dividend was affected by industry outlook, earnings, operating cash flow, and dividend payout rate; discount rate was affected by market @b and risk-free rate; and dividend growth rate was affected by earnings growth rate and dividend payout growth rate. Also, according to literatures, discount rate possessed a self-effect relationship. Among the eight evaluation criteria, market @b was the most important factor influencing investment decisions, followed by dividend growth rate and risk-free rate. In stock evaluations, leadership companies in the solar industry outperformed those in handset and lens, becoming investors' favorite stock group at the time that this research was conducted.