On the Choice of Baselines in Multiattribute Portfolio Analysis: A Cautionary Note | Zendy

Robert T. Clemen | Zendy; James E. Smith | Zendy

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On the Choice of Baselines in Multiattribute Portfolio Analysis: A Cautionary Note

Author(s) -

Robert T. Clemen,

James E. Smith

Publication year - 2009

Publication title -

decision analysis

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.527

H-Index - 22

eISSN - 1545-8504

pISSN - 1545-8490

DOI - 10.1287/deca.1090.0158

Subject(s) - portfolio , baseline (sea) , portfolio optimization , decision maker , set (abstract data type) , project portfolio management , actuarial science , modern portfolio theory , computer science , value (mathematics) , operations research , mathematical economics , economics , management science , mathematics , machine learning , financial economics , project management , management , programming language , oceanography , geology

In multiattribute portfolio optimization, a decision maker must evaluate a number of projects on multiple dimensions and then select the set of projects that optimizes the portfolio's overall value. In this note, we discuss the importance of establishing an appropriate baseline score for not doing a project in multiattribute portfolio analysis. We believe that practitioners often implicitly assume that not doing a project results in the worst possible score on all attributes. We argue that this assumption is often inappropriate and may lead to incorrect recommendations.

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