ABSTRACT Asset allocation in portfolio construction must simultaneously consider market conditions and investors’ specific preferences. Therefore, it is a multi-criteria decision that goes beyond the scope of the two-criteria, mean and variance of the portfolio returns, optimization method that traditionally prevails in the financial literature. This article suggests a procedure that makes integrated asset management possible, based on the Analytic Hierarchy Process combined with a mean variance and goal programming model. We illustrate this procedure with data from Canadian mutual funds over a total period of five years and three months, from September 2002 to November 2007. The results obtained are encouraging, as the portfolios constructed in this manner perform better than the S&P/TSX 60 index, which is the reference portfolio for the Canadian market.
Cite this paper
K. Sedzro, A. Marouane and T. Assogbavi, "Analytical Hierarchy Process and Goal Programming Approach for Asset Allocation," Journal of Mathematical Finance, Vol. 2 No. 1, 2012, pp. 96-104. doi: 10.4236/jmf.2012.21012.
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