Application of entropy method for decision making of value investment
Hua Li · Journal of Zhengzhou University of Light Industry · 2012
The weighted moving average-entropy method to evaluate decision making process of value investment was introduced.Five performance criteria according to Buffet proposed were used for measuring the growth potential of firms and were represented by weighted moving average numbers based on the real financial data from 2007 to 2009.This method was applied to rank the 20 selected stocks in Shanghai Stocks Exchange.The portfolio with the top 5 stocks was proven to have higher return rate than that the 10 selected stocks within the 19-month investment period.The empirical study showed the effectiveness of the weighted moving average-entropy method in the decision making process of value investment and it was more simple and efficient than PROMETHEE method.