TY - JOUR
T1 - A multi-dimensional decision framework to support corporate bond investment
AU - Liao, Ziqi
AU - Cheung, Michael Tow
N1 - Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 2012/4
Y1 - 2012/4
N2 - This paper constructs a multi-dimensional decision framework to support investment in corporate bonds. The Analytic Hierarchy Process (AHP) is first customized to accommodate six fundamental criteria governing investor behaviour. It is then shown that, after pairwise comparison of criteria and asset alternatives at appropriate framework levels, a set of weights can be calculated to prioritize the different bonds and allocate wealth over a portfolio which is best in terms of judgmental conformity with the individual’s investment goal and investment criteria. Apart from the practical advantages following from ready operationalization and computation, our framework is analytically grounded on the Nobel Prize-winning paradigms of bounded rationality and rational expectations. In particular, an index can be obtained to test for sufficient decision consistency on the part of the bounded-rational individual, and a method is offered to rationally and operationally model changes in investor preferences, perceptions, and expectations under market dynamics and the impact of such changes on the demand for corporate bonds.
AB - This paper constructs a multi-dimensional decision framework to support investment in corporate bonds. The Analytic Hierarchy Process (AHP) is first customized to accommodate six fundamental criteria governing investor behaviour. It is then shown that, after pairwise comparison of criteria and asset alternatives at appropriate framework levels, a set of weights can be calculated to prioritize the different bonds and allocate wealth over a portfolio which is best in terms of judgmental conformity with the individual’s investment goal and investment criteria. Apart from the practical advantages following from ready operationalization and computation, our framework is analytically grounded on the Nobel Prize-winning paradigms of bounded rationality and rational expectations. In particular, an index can be obtained to test for sufficient decision consistency on the part of the bounded-rational individual, and a method is offered to rationally and operationally model changes in investor preferences, perceptions, and expectations under market dynamics and the impact of such changes on the demand for corporate bonds.
KW - Analytic hierarchy process
KW - Corporate bond investment
KW - Multi-dimensional decision framework
UR - http://www.scopus.com/inward/record.url?scp=84866278772&partnerID=8YFLogxK
U2 - 10.1080/12460125.2012.680355
DO - 10.1080/12460125.2012.680355
M3 - Journal article
AN - SCOPUS:84866278772
SN - 1246-0125
VL - 21
SP - 161
EP - 170
JO - Journal of Decision Systems
JF - Journal of Decision Systems
IS - 2
ER -