Incorporating Multiple Attribute Decision Making and Fuzzy Clustering in Selection of Taiwan Mutual Fund
Date Issued
2008
Date
2008
Author(s)
Chen, Chieh-Yu
Abstract
As the increase of people’s notion to financial management, the importance of professional financial management is getting investors’ attention. Professional investment has become a trend in which mutual fund is most valued by investors. Facing various kinds of mutual fund, it is common that investors feel difficult when choosing fund target. Besides, different investors have different preferences and weights to risks and profits. As a result, funds which suit different type of investor may vary. This study constructs a fund evaluation model based on the viewpoints of professional investors in the market. The study uses the most easily get and most concerned information by investors, including historical fund return and risk index, to classify and rank funds. Besides, considering different investor has different preference to risks and returns, the research uses multiple criteria decision making theory to calculate subjective weight of each fund index, applying to fund clustering and ranking to provide more customized suggestions. This study uses real data from Taiwan mutual fund, applying fund indexes such as return, excess return (α), standard deviation (σ), and market risk (β). The cause effect relationship of the selected fund indexes in the constructed evaluation model is firstly confirmed by professional opinion and DEMATEL algorithm. After that, ANP algorithm is used as the framework to get weights. Based on professional investors’ suggestion, Weighted FCM is used to classify fund according to its historical return and risk. This helps to provide investors a direction to choosing funds. Then, the study uses TOPSIS algorithm which is multiple attribute decision making skill to rank each fund, providing more detailed fund choosing guidance. The fund evaluation model is quite easy to understand for investors. As long as investors know what kind of investors they belong to, they can quickly get suggestions regarding fund choosing. Also, they can calculate their preference to return and risk indexes, which is a percentage for them to consider when making individual fund choosing decisions.
Subjects
Mutual Fund
Type
thesis
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