What is it about?

This research presents an alternative logic to the traditional one, as it seeks the reduction of investment risk based on the results of the management of the companies, reflected through their indicators. The model implies a change in how companies, financial institutions and small and medium investors choose their assets to form investment portfolios.

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Why is it important?

This study presents a proprietary methodology by merging the PCA tool with MCDA to build efficient investment portfolios.


The authors believe that the model has the potential to attract investors looking for long-term gains, such as public servants, retirees, professionals and others who seek to build heritage to overcome the adversities of the uncertain future. The model offers these investors the opportunity to choose which companies to invest in, based on established indicators in the literature, whose information is available in the market. The model systematizes the information and builds a ranking of the best companies so that the investor can make a conscious decision, thus avoiding what experts call a “herd effect”, which makes the majority of investors decide according to the oscillation of the market, thus ignoring the financial fundamentals of companies.

PhD Marcio Pereira Basilio
Universidade Federal Fluminense

Read the Original

This page is a summary of: Investment portfolio formation via multicriteria decision aid: a Brazilian stock market study, Journal of Modelling in Management, May 2018, Emerald,
DOI: 10.1108/jm2-02-2017-0021.
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