An out-of-sample framework for TOPSIS-based classifiers with application in bankruptcy prediction

This work was conducted while Prof. Pérez-Gladish was a visitant researcher at the Business School of The University of Edinburgh. She would like to thank the Spanish Ministry of Education Culture and Sport for its financial support within the framework of its International Mobility Program for Senior Researchers “Salvador de Madariaga” (Reference PRX16-0169).Since the publication of the seminal paper by Hwang and Yoon (1981) proposing Technique for Order Performance by the Similarity to Ideal Solution (TOPSIS), a substantial number of papers used this technique in a variety of applications requiring a ranking of alternatives. Very few papers use TOPSIS as a classifier (e.g. Wu and Olson, 2006; Abd-El Fattah et al., 2013) and report a good performance as in-sample classifiers. However, in practice, its use in predicting discrete variables such as risk class belonging is limited by the lack of an out-of-sample evaluation framework. In this paper, we fill this gap by proposing an integrated in-sample and out-of-sample framework for TOPSIS classifiers and test its performance on a UK dataset of bankrupt and non-bankrupt firms listed on the London Stock Exchange (LSE) during 2010–2014. Empirical results show an outstanding predictive performance both in-sample and out-of-sample and thus opens a new avenue for research and applications in risk modelling and analysis using TOPSIS as a non-parametric classifier and makes it a real contender in industry applications in banking and investment. In addition, the proposed framework is robust to a variety of implementation decisions.PostprintPeer reviewe

A combined AHP-Delphi approach to assess the social responsibility degree of equity mutual funds

Trabajo presentado al 14th International Symposium on the Analytic Hierarchy Process celebrado en Washington (US) del 29 de junio al 2 de julio de 2014.The aim of this paper is to propose a ranking method for Spanish equity mutual funds based on multiple social responsibility criteria, which could allow individual and institutional investors to make investment decisions based on a set of agreed social responsible values. In order to reach this goal three key questions have been addressed: the identification of the main stakeholders; the definition of an agreed list of socially responsible investment criteria and, the determining of the agreed relative importance given to each criterion in the decision making process. In order to calculate this relative importance of the criteria a participative AHP procedure has been carried out.Peer Reviewe

Measuring the territorial effort in research, development, and innovation from a multiple criteria approach: application to the Spanish regions case

Research, development and innovation are fundamental for the socioeconomic growth of the territories. Consequently, many governments set spending targets for research and development (R&D), for example the EU has a goal of reaching a spending target of 3% of the Union’s GDP. However, recent literature emphasizes that spending on R&D may not be the most appropriate indicator to measure the innovative efforts of a particular territory. Multidimensional indicators are required to measure the different elements that reflect the capacity of each scientific and innovative system to transmit the scientific results into productivity and competitiveness advancements. In this context, the objective of this paper is to propose a method that produces a synthetic indicator to rank various territories as an aid to understanding the multidimensional complexities of the innovation process. To reach this objective, the methodological approach proposed is a modified version of the unweighted TOPSIS (UW-TOPSIS) method. In this paper, this multiple criteria decision-making method is used to rank the 17 Spanish autonomous communities in terms of their innovation efforts. The obtained results show the capacity of the proposed technique to evaluate the relative situation of each community using a multidimensional approach. However, it also allows us to provide policy guidance to political decision-makers on socioeconomic aspects that can be improved in each regio

La protección medioambiental como criterio en la selección de inversiones socialmente responsables: una aproximación multicriterio

[EN] A greater environmental and ethical awareness of companies and organizations is also ap-plied to portfolio selection. This note aims to put forward a multicriteria model of Goal Programming (GP) to design efficient portfolios considering classic financial criteria and environmental criteria[ES] La mayor concienciación medioambiental y ética de empresas y organizaciones se traslada también a la selección de carteras. En esta nota se propone un modelo multicriterio de programación por me-tas para la selección de carteras incorporando a los criterios clásicos financieros, criterios mediambientalesGarcía-Bernabeu, A.; Pla-Santamaria, D.; Bravo, M.; Pérez-Gladish, B. (2015). The Environmental Protection as a selection criterion in Socially Responsible Investments: A multicriteria approach. Economía Agraria y Recursos Naturales - Agricultural and Resource Economics. 15(1):101-112. doi:10.7201/earn.2015.01.06SWORD10111215

Grading investment diversification options in presence of non-historical financial information

Modern portfolio theory deals with the problem of selecting a portfolio of financial assets such that the expected return is maximized for a given level of risk. The forecast of the expected individual assets’ returns and risk is usually based on their historical returns. In this work, we consider a situation in which the investor has non-historical additional information that is used for the forecast of the expected returns. This implies that there is no obvious statistical risk measure any more, and it poses the problem of selecting an adequate set of diversification constraints to mitigate the risk of the selected portfolio without losing the value of the non-statistical information owned by the investor. To address this problem, we introduce an indicator, the historical reduction index, measuring the expected reduction of the expected return due to a given set of diversification constraints. We show that it can be used to grade the impact of each possible set of diversification constraints. Hence, the investor can choose from this gradation, the set better fitting his subjective risk-aversion level

An ahp-based approach to mutual funds social performance measurement

Socially responsible investors have both, financial as well as non-financial goals in investment decision-making. Several methods for ranking mutual funds based on financial performance have been developed; nonetheless, ranking based on non-financial performance is rather underdeveloped. The aim of this article is to present a ranking method for mutual funds, based on their socially responsible performance. The suggested ranking method could complement financial information and help socially responsible mutual fund managers, individual and institutional investors in their portfolio selection process. The results reveal, after comparing the rank obtained with the proposed method with rankings derived from other socially responsible measurements based on just one decision criterion, that an integrated framework using multiple criteria decision analysis (MCDA) techniques could help the investor in selecting a suitable socially responsible mutual funds portfolio, because the consideration of several criteria reflect more precisely the multiple dimensions of this decision making problem