Portfolio optimization and asset allocations using DEA and DEA/AHP

The present study is an attempt toward evaluating the performance of portfolios and asset allocations usingData Envelopment Analysis (DEA) and DEA/AHP (Analytic Hierarchy Process) ranking model. Among many evaluation methods, DEAis one of the best methods for assessing the relative efficiency a group of homogenous Decision Making Units (DMUs) that use multiple inputs to produce multiple outputs.The problem consists of choosing an optimal set of assets in order to minimize the risk and maximize return. The purpose of this paper is to evaluate portfolio in two steps: asset selection using (DEA) and asset allocations using DEA/AHP and ranking mutual funds in practical example. Thus, DEA/AHP ranking model is compared with Anderson and Petersen (AP) ranking model. This method is illustrated by application in mutual funds and extremely weights are obtained via DEA/AHP for making efficient portfolio. The finding could be used for constructing efficient portfolio in stock companies, in various finance organization and public and private sector companies.