A hybrid multiple criteria decision-making model for investment decision making

Abstract

Investments are accompanied by risks. How investors choose the right investment tools to assist in the selection of investment targets is a topic worth exploring. Therefore, this study aimed to develop an investment decision-making process to deal with this issue. Firstly, we proposed a globalized modified grey relational analysis to select the representative indicators including the financial indicators and risk measurement indicators. Then we combined financial and risk evaluation indicators, and divided companies into low, moderate and high-risk groups through the grey clustering analysis. Finally, Vlse Kriterijumska Optimizacija Kompromisno Resenje (VIKOR) combined with the grey entropy weighting method was applied to business performance evaluation and sorting of each grouping. In order to verify this study, a combination of 21 financial ratios and four risk indicators was utilized in order to verify the evaluation and decision-making process in the operating performance of 62 listed opto-electronics companies in Taiwan. The results of ranking the operating performance for each group can be made available to company managers as a reference in order to enhance competitiveness and business performance. The results can also be used as the basis for decision-making to aid investors who are facing many investment portfolios.

Keywords:

• decision-making process
• performance evaluation
• VIKOR
• grey relational analysis
• grey clustering analysis
• grey entropy weighting method

JEL Classification:

• C44
• D81
• G11
• L25

Additional information

Notes on contributors

Li-Chang Hsu

Li-Chang HSU is a Professor of economics at Ling Tung University, in Taiwan. His research areas are decision-making theory and practice, grey system theory and technology management. His articles are published by Technological and Economic Development of Economy, Journal of Business Economics and Management, British Journal of Management, Technological Forecasting and Social Change, Expert Systems with Application, Service Business, Journal of Electronic Commerce Research and others.