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Multicriteria security evaluation: does it cost to be traditional?

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Abstract

To shed light on whether and how effective MCDA can be in security screening, as an alternative or complementary modeling procedure, to a real-world business model currently used in the banking industry, we attempt to answer the following question: Does it cost to be traditional? This is the first time that four popular MCDA methods are utilized simultaneously, and an integrated comparative framework is presented, to assess its effectiveness, against an ISO-certified investment management protocol. The portfolios generated, either as the individual output of each MCDA method or as the intersection of results of all the utilized methods, perform better or equally satisfactory as the professional benchmark. This is true, both in-sample and out-of-sample, considering a large universe of European mutual funds, managed by all the well-known investment houses, and spanning the whole spectrum of strategies. Also, the empirical validation analysis provides insights that, the multicriteria techniques exploited, might effectively utilized, towards enhancing the absolute and risk-adjusted portfolio returns and enforcing the underlying managerial transparency and compliance. After all, this study implies that the MCDA paradigm may be effective on the structured appraisal of financial securities, and the corresponding economic stylized facts.

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Authors and Affiliations

  1. ESSCA École de Management, 55 Quai Alphonse Le Gallo, 92513, Paris, France

    Panos Xidonas

  2. Piraeus Bank, 4 Amerikis Str., 10564, Athens, Greece

    Ilias Lekkos & Charis Giannakidis

  3. Athens University of Economics and Business, 76 Patision Str, 10434, Athens, Greece

    Christos Staikouras

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  1. Panos Xidonas
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Correspondence to Panos Xidonas.

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Xidonas, P., Lekkos, I., Giannakidis, C. et al. Multicriteria security evaluation: does it cost to be traditional?. Ann Oper Res 323, 301–330 (2023). https://doi.org/10.1007/s10479-023-05212-w

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