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Application of the Fuzzy Weighted Average in Strategic Portfolio Management *
Author(s) -
Lin Chinho,
Tan Bertram,
Hsieh PingJung
Publication year - 2005
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5414.2005.00081.x
Subject(s) - portfolio , project portfolio management , computer science , application portfolio management , operations research , fuzzy logic , set (abstract data type) , modern portfolio theory , mathematical optimization , linear programming , fuzzy set , integer programming , portfolio optimization , management science , economics , artificial intelligence , project management , mathematics , algorithm , finance , management , programming language
We propose a systematic approach that incorporates fuzzy set theory in conjunction with portfolio matrices to assist managers in reaching a better understanding of the overall competitiveness of their business portfolios. Integer linear programming is also accommodated in the proposed integrated approach to help select strategic plans by using the results derived from the previous portfolio analysis and other financial data. The proposed integrated approach is designed from a strategy‐oriented perspective for portfolio management at the corporate level. It has the advantage of dealing with the uncertainty problem of decision makers in doing evaluation, providing a technique that presents the diversity of confidence and optimism levels of decision makers. Furthermore, integer linear programming is used because it offers an effective quantitative method for managers to allocate constrained resources optimally among proposed strategies. An illustration from a real‐world situation demonstrates the integrated approach. Although a particular portfolio matrix model has been adopted in our research, the procedure proposed here can be modified to incorporate other portfolio matrices.