International Journal of Innovative Technology and Exploring Engineering (IJITEE) ISSN: 2278-3075, Volume-8 Issue-10, August 2019 4078 Retrieval Number J88580881019/2019©BEIESP DOI: 10.35940/ijitee.J8858.0881019 Published By: Blue Eyes Intelligence Engineering & Sciences Publication Portfolio Selection using DEA-COPRAS at Risk – Return Interface Based on NSE (India) S. Gupta, G. Bandyopadhyay, M. Bhattacharjee, S. Biswas Abstract: Portfolio formation holds paramount importance in the process of the investment decision making since, a single door investment (SDI) option is much riskier than a multiple door investment (MDI) option. Among available financial instruments, the stock market (SM) has allured investors because of its liquidity and growth opportunities. However, the effectiveness of the investment decision is largely reflected in the selection of the constituent elements of the portfolio by an investor while trading off risk and return. In this paper, after an initial level selection of for formulating a possible portfolio by using Perceptual Map (PM), we have applied DEA to calculate the efficiency of the stocks at the risk-return interface based on the market performance. In order to ascertain that the stock selection is logical and worthwhile, we further probe the fundamental performances over a time period of five consecutive financial years using the method of Multi-Criteria Decision Analysis (MCDA) framework based on the Complex Proportional Assessment (COPRAS) method, where, the criteria weights are calculated by using the entropy method. A consistency is visible in the yearly fundamental performances and a significant pattern with regard to the portfolio selection. Keywords: Portfolio Selection, Stock Market, Perceptual Mapping, Data Envelopment Analysis (DEA), Complex Proportional Assessment (COPRAS). I. INTRODUCTION In the post-liberalization period, the Indian stock market (ISM) has witnessed a transformational growth, which substantially has accelerated by several reformatory initiatives taken by the Govt. of India (GOI) and rapid development at the Information Technology (IT) frontier. Because of its comparatively higher return with respect to the other conventional investment options like Fixed Deposits (FD), National Savings Certificates (NSC), and Public Provident Funds (PPF), ISM has been a lucrative investment avenue for the investors. However, in line with the famous propositions of renowned investment experts, one has to invest in multiple stocks instead of choosing a ‘perfect’ single stock because of two reasons: first, as stock market movement is dynamic and changing in nature and so as the behavior of the investors, the word ‘perfect’ is quite far - fetched; second, a bundle of stocks Revised Manuscript Received on August 05, 2019 Sayan Gupta, Management studies, National Institute of Technology, Durgapur, India. Gautam Bandyopadhyay, Management studies, National Institute of Technology, Durgapur, India. Malay Bhattacharjee, Management studies, National Institute of Technology, Durgapur, India. Email: malay. Sanjib Biswas, Management studies, Calcutta Business School, Kolkata, India. (preferably from the heterogeneous sectors) eases out the effect of the total risk. For rational capital investment in the stock market forming a portfolio is therefore quite imperative for negating the ‘risk’ factor while increasing the ‘return’ (Steinbach, 2001; Rubinstein, 2002). The underlying quest is how to allocate the total capital among the stocks forming the portfolio for balancing risk and return in line with the investors’ financial perspectives and choices. In other words, the basic intention is to reduce the apparent controllable risk through effective diversification, which, in the domain of portfolio management, known as the diversifiable or unsystematic risk. Essentially, it forms the basic premise of the Modern Portfolio Theory (MPT) which rests on the principles of maximizing the return expected from a given portfolio while reducing portfolio risk (Fabozzi et al., 2002). MPT started with the seminal work by Markowitz (1952) addressed the issue of the portfolio selection within the framework of Mean-Variance (MV). While extending the theory, researchers postulated the use of Skewness and Kurtosis (Jaro and Na, 2005; Bhattacharyya et al., 2011; Bhattacharyya and Kar, 2011). In this regard, Briec et al. (2007) put forth the shortage function concept for measuring relative efficiencies with the objectives such as an increase in the mean return and skewness while decreasing the variances. Therefore, selection of the stocks for constructing a portfolio depends on multiple objectives which not only covers the return aspects, but also considers risk-based attributes and timing considerations. Further, the choice of portfolio selection is subject to the fulfillment of multiple objectives or criteria by trading off at the risk-return interface. Meanwhile, it is equally important to reflect on the fundamental performances of the constituent stocks at the organizational level, complementing the framework suggested by Markowitz (1952) and subsequently other extended frameworks (Jaro and Na, 2005). Quite understandably it provides the stability to the rational investment decision making by understanding the intrinsic value of the organizations (which assumes fair linkage with the stock level performance), efficiency and growth (Yoo and Shin, 2015). With this pretext, the paper is organized as follows. The next part looks into literature of same area of study. In the third part, we summarize the methodological framework used for the study.