Applying dominance based rough set approach and multiple criteria decision making methods for stock evaluation based on fundamental analysis: A case of Viet Nam stock exchange

Abstract

In the investment industry, the vast majority of issue is the stock selection problem, which is totally solved by analyzing financial ratios. However, it is difficult to obtain the evaluating of complicated and imprecise financial criteria in the stock exchange, based on fundamental analysis. Therefore, we suggested a combined soft computing model for choosing the value stock and CORE criteria, which includes formal concept analysis (FCA), a dominance-based rough set approach (DRSA), and decision-making trial and evaluation laboratory technique (DEMATEL). The objectives of the suggested approaches are to obtain explicit decision rules, identify the core criteria that may discriminate undervalued stocks, explore the cause–effect relationships among the criteria and attributes in the strong decision rules to get more insights. To assess and present the proposed model, this case used a group of 100 stocks in VN100 index (HOSE) as an empirical case. The findings lead to the extensively understanding of the value criteria and stocks selection problem in practice. Keywords: Criteria selection, DRSA, FCA, DEMATEL, cause–effect relationships.