Multicriteria Decision Making and Portfolio Management with Arbitrage Pricing Theory

This paper proposes to combine Arbitrage Pricing Theory (APT) and multicriteria decision making to model the portfolio management process. First APT is used to construct some efficient portfolios to estimate its expected return and to identify influence factors and risk origins. Then, two multicriteria decision methods: ELECTRE TRI outranking method and the MINORA interactive system are used to select attractive portfolio, using APT factors as selection criteria. This methodology is illustrated by an application to the French market.