Applicability of Fuzzy TOPSIS Method in Optimal Portfolio Selection and an Application in BIST

Oguzhan Ece, Ahmet Serhat Uludag

Abstract


General structure of saving-investment cycle and the effectiveness of this structure are included in the most significant issues of the financial system. One of the points of intervention in providing an effective saving-investment cycle is possible through channeling the savings toward optimal investment fields. This study aims at detecting the existence of alternative methods in determining optimal selection combination in the risk and revenue perspective of individual and corporate investors who would like to evaluate their savings in capital markets. For this purpose, the applicability of Fuzzy TOPSIS method, one of the multi-criteria decision making techniques in optimal portfolio selection was researched. The applicability of the stock investment alternatives ranked according to Fuzzy TOPSIS method was examined by comparing them to the optimal selection results determined according to Markowitz, one of the modern portfolio management techniques. In the study where performance indexes were used as assessment criteria the results of both methods were discussed in terms of risk at a certain revenue level and revenue at a certain risk level through Johnson and Sharp Indexes. The results obtained determined that the Fuzzy TOPSIS portfolio alternatives created using Fuzzy TOPSIS method revealed quite positive results in terms of performance, revenue and risk and pointed at applicability of Fuzzy TOPSIS method in optimal portfolio selection as well.


Full Text:

PDF


DOI: https://doi.org/10.5539/ijef.v9n10p107

Copyright (c) 2017 Oguzhan Ece, Ahmet Serhat Uludag

License URL: http://creativecommons.org/licenses/by/4.0

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)  Email: ijef@ccsenet.org

Copyright © Canadian Center of Science and Education

To make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.