Contents of Volume 1, Number 1
June 2005
Editorial
C. Zopounidis
Multiple Objectives in Portfolio Selection
R.E. Steuer, Y. Qi, M. Hirschberger
Abstract: We begin this paper by first comparing the theory of present-day portfolio selection, which is a theory for standard investors (whose utility functions take on only the single argument of portfolio return), with a developing theory for non-standard investors (whose utility functions are allowed to take on additional arguments). Examples of additional arguments are dividends, liquidity, social responsibility, amount of short selling, and so forth. Then, with portfolio selection for non-standard investors taking on the form of a multi-objective stochastic programming problem, equivalent deterministic formulations involving more than mean and variance are explored. With the nondominated sets of non-standard investors no longer frontiers, but now surfaces, the tools and techniques that must be imported from multiple criteria optimization to compute and analyze them are next discussed. The paper concludes with a list of research topics that are candidates for extending the multiple criteria portfolio selection material of this paper.
Analysis of Stock Market Structure by Identifying Connected Components in the Market Graph
A. Arulselvan, V. Boginski, A. Kammerdiner, P.M. Pardalos
Abstract: We consider a recently introduced network-based representation of the U.S. stock market referred to as the market graph, which has been shown to follow the power-law model. We propose a computationally efficient technique for identifying clusters of similar stocks in the market by partitioning the market graph into a set of connected components. It turns out that these groups have specific structure, where each cluster corresponds to certain industrial segments. Moreover, the size of these connected components is consistent with the theoretical properties of the power-law model.
A Comparison of Yield Curve Estimation Methods: The Greek Case
P. Manousopoulos, M. Michalopoulos
Abstract: The yield curve is a very important tool for valuating debt instruments and the information it contains has a variety of applications, ranging from a bond investment decision to monetary policy guideline. Therefore the construction of the yield curve should be made very carefully, guaranteeing that the information it depicts reflects the true market status and prospect. In this paper we present a variety of methods for estimating the yield curve and the criteria to evaluate them. We also present the results of applying these methods to data from the Greek bond market.
Optimal Loan Pricing Under Uncertainty
Α.G. Noulas, J.A. Papanastasiou
Abstract: This paper examines the problem of optimal loan pricing under uncertainty. The model indicates the positive relation between loan price and lender’s risk aversion. Moreover, general results are derived to show the relation between loan pricing and the first two moments of the loan interest elasticity distribution. Finally empirical evidence is used to investigate the relation between borrowers’ risk and the moments of the loan elasticity distribution.
A Comparison and Integration of Classification Techniques for the Prediction of Small UK Firms Failure
Ch. Gaganis, F. Pasiouras, A. Tzanetoulakos
Abstract: In this paper we compare the efficiency of five classification techniques namely, discriminant analysis, logit analysis, UTilites Additives Discriminantes (UTADIS), Multi-Group Hierarchical DIScrimination (MHDIS), and Support Vector Machines (SVMs) in predicting small firms failure. We then investigate the efficiency of integrated models developed through a majority voting rule and stacked generalization. The sample consists of 984 small UK firms, half of which failed between 1997 and 2004. The models are evaluated both in terms of their prediction accuracy, as well as with ROC analysis.