Nonadditive Multiattribute Utility Functions for Portfolio Decision Analysis

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Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
Date
2021-11
Major/Subject
Mcode
Degree programme
Language
en
Pages
Series
Operations Research
Abstract
Portfolio decision analysis models support selecting a portfolio of projects in view of multiple objectives and limited resources. In applications, portfolio utility is commonly modeled as the sum of the projects’ multiattribute utilities, although such approaches lack rigorous decision-theoretic justification. This paper establishes the axiomatic foundations of a more general class of multilinear portfolio utility functions, which includes additive and multiplicative portfolio utility functions as special cases. Furthermore, we develop preference elicitation techniques to assess these portfolio utility functions as well as optimization models to identify the most preferred portfolio in view of resource and other constraints. We also examine how the functional form of the portfolio utility function affects decision recommendations by using randomly generated and real problem instances.
Description
Keywords
multiattribute utility theory, portfolio decision analysis, resource allocation
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Citation
Liesiö , J & Vilkkumaa , E 2021 , ' Nonadditive Multiattribute Utility Functions for Portfolio Decision Analysis ' , Operations Research , vol. 69 , no. 6 , 34 , pp. 1886-1908 . https://doi.org/10.1287/opre.2020.2046