Investment decisions can have a large impact on
society. All investment decisions contain an inherent level of risk. This risk
is associated with poor returns, loss of money, missed opportunities or even
bankruptcy. Research by Wu , et. al. (2012) creates an analytical hierarchy
process-group decision making model (IAHP-GDM) that works to complement group
decision-making for more accurate investment decisions.
The types of risks investment managers make are
related to strategy selection, social risks, policy risks, credit risks,
economic risks, technology risks, interest rate fluctuation, operational risks,
and contract risks (Shen, 2009; Zavadskas, et. al., 2010). Decision-makers should seek to understand
these risks and attempt to encourage the best decisions possible. This can
become even more difficult when higher volumes of information create confusion.
These risks can be heightened when one person makes decisions
based upon limited knowledge. In an investor’s perspective decisions move
through four components that include problem recognition, information search,
evaluation of alternatives and finally investment decisions (Shyng et. al,
2010). Personal experience can be an
enhancer or detractor in terms of bias within these decisions.
Some of the fallacies come from (Kim & Ahan
1997):
1. Lack of time, knowledge and data.
2. Difficult to quantify attributes.
3. A single decision maker that has limited
knowledge, expertise, information processing ability, and an uncertain
environment.
4. Limited expertise among group decision makers.
Decision-makers may feel pressure to make a decision
but do not have the proper information nor do they have the expertise to make
these decisions. This creates a problem that causes quick decisions to be made
without an accurate analysis. When poor decisions are made they can impact a
running chain of events that are difficult to change.
The authors found that by using
an analytical hierarchy process-group decision making model (IAHP-GDM) they
were able Analytical Hierarchy Process-group decision making (IAHP-GDM) can
foster greater group decision making. Group decision making can lower bias in
decisions and help determine alternatives. Decision making models can help
analyze those choices for greater accuracy and results.
Wu,
W. et. al. Improved AHP-Group Decision-Making for Investment Strategy
Selection. Technology & Economic
Development of Economy, 18 (2).
Kim, S. H.; Ahn, B. S. 1997.
Group decision-making procedure considering preference strength under incomplete
information, Computer & Operations Research 24: 1101–1112.
Shen, C. (2009). A bayesian
networks approach to modeling financial risks of E-Logistics investments, International
Journal of Information Technology & Decision Making 8(4): 711–726.http://dx.doi.org/10.1142/S0219622009003594
Shyng, J. et. al. ( 2010). Using
FSBT technique with rough set theory for personal
investment portfolio analysis, European
Journal of Operational Research 201(2): 601–607.
Zavadskas, E., et. al. (2010).
Risk assessment of construction projects, Journal of
Civil
Engineering and Management 16(1): 33–46. http://dx.doi.org/10.3846/jcem.2010.03
