Multi-criteria Set Partitioning for Portfolio Management: A Visual Interactive Method

Abstract

A visual interactive multi-criteria decision-making method for partitioning a portfolio of assets into mutually exclusive categories is presented. The two principal decision categories are hold and sell - portfolio assets in the sell category are considered as potential sale prospects, and the other assets in the portfolio are considered as potential retention prospects. The problem may be mathematically formulated as a multi-criteria 0/1 knapsack problem with multiple constraints. The decision-making method centers on the utilization of several coupled 2D projections of the portfolio in the multi-dimensional criterion space. The decision-maker interacts with these projections in a variety of ways to express and record multi-category (hold, hold-bias, sell-bias, and sell) set partitioning preferences. The decision-maker may also set an aggregated preference threshold that is utilized for partitioning the portfolio into the two principal hold and sell categories. The decision-maker may further fine-tune their preferences and threshold settings so as to achieve a multitude of financial targets.