Integrating Behavioural Finance Into Strategic Investment Evaluation: A Fuzzy Logic

Abstract

In the recent era of growing awareness, the investment decision making process is not only evaluated by the quantitative parameters but also the psychological constructs of the investors. This study attempts to apply the Fuzzy logic of Analytic Hierarchy Process to evaluate the investment strategies adopted by the individual. The Fuzzy Logic AHP model designed can be used by the analyst or the advisors to rank the strategies with respect to the multiple criteria that influence the investment decision making process. The study uses the Saaty Scale to convert the linguistic statements provided by the experts for the pair wise comparisons of the criteria and the investment strategies. The study suggests that Trading frequency has the maximum weights derived and followed by Asset Allocation. The AHP- FUZZY logic can be further extended by using other criteria and factors impacting the investment decision making process under different decision-making situations.