Selection of stocks using constrained fuzzy AHP and PROMETHEE

Abstract In a portfolio selection problem, the first step is to choose suitable stocks at the right time. Many approaches and principles have been used to help investor solve the problem. This paper documents a new approach for the portfolio selection problem based on the combined method of Constrained Fuzzy Analytic Hierarchy Process (CFAHP) and the Preference Ranking Organization Method for Enrichment Evaluations (PROMETHEE). The proposed approach is structured around two stages: the first stage, the CFAHP is used to evaluate the attribute weights; the second stage, the alternatives are then ranked by PROMETHEE. The integrated approach exhibits advantages in that more objective attribute weights can be obtained; and furthermore, it reduces the huge computation in CFAHP and gets more reasonable ranking results. This approach has been applied in Chinese stocks as a real case and the results show its usefulness in facilitating the final stock selection decisions for the investor.