Nadir compromise programming: A model for optimization of multi-objective portfolio problem

Authors:
Maghsoud Amiri;Mostafa Ekhtiari;Mehdi Yazdani
Affiliations:
Department of Industrial Management, Allame Tabatabaee University, Tehran, Iran;Department of Industrial & Mechanical Engineering, Islamic Azad University, Qazvin Branch, Qazvin, Iran;Department of Industrial & Mechanical Engineering, Islamic Azad University, Qazvin Branch, Qazvin, Iran
Venue:
Expert Systems with Applications: An International Journal
Year:
2011

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Abstract

In problem of portfolio selection, financial Decision Makers (DMs) explain objectives and investment purposes in the frame of multi-objective mathematic problems which are more consistent with decision making realities. At present, various methods have introduced to optimize such problems. One of the optimization methods is the Compromise Programming (CP) method. Considering increasing importance of investment in financial portfolios, we propose a new method, called Nadir Compromising Programming (NCP) by expanding a CP-based method for optimization of multi-objective problems. In order to illustrate NCP performance and operational capability, we implement a case study by selecting a portfolio with 35 stock indices of Iran stock market. Results of comparing the CP method and proposed method under the same conditions indicate that NCP method results are more consistent with DM purposes.