PROMETHEE: a Fuzzy Algorithm for Decision Making in Stock Market Value Investing

Hua Li(1*), Shuanghong Qu(2), Hua Zhu(3)

(1) Department of Mathematics, Zhengzhou University, Zhengzhou 450001, Henan, China
(2) Department of Mathematics and Information Science, Zhengzhou University of Light Industry, Zhengzhou 450002, Henan, China
(3) Department of Mathematics, Zhengzhou University, Zhengzhou 450001, Henan, China
(*) Corresponding author


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Abstract


This thesis introduces the fuzzy PROMETHEE method to the investment decision-making process of value investing. Five performance criteria are used for measuring the growth potential of firms and are represented by fuzzy numbers based on the real financial data. The fuzzy PROMETHEE method is applied to rank 20 randomly selected stocks in Shanghai Stock Exchange.  The portfolio with top 5 stocks is proven to have higher return and less risk than the portfolio with the top 10 stocks throughout the whole 17-month investment period. The empirical study shows the effectiveness of the fuzzy PROMETHEE method in the decision making process of value investing in stock markets
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Keywords


Fuzzy Sets; Decision Making; Finance; Value Investing; PROMETHEE

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References


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