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The University of Southampton
CORMSIS Centre for Operational Research, Management Sciences and Information Systems

CORMSIS Seminar - "Psychological Heuristics for Portfolio Decisions", by Ian Durbach (St Andrews, Cape Town) Event

Time:
14:00 - 16:00
Date:
16 May 2019
Venue:
Building 54, Room 8033, School of Mathematical Sciences, University of Southampton, Highfield Campus, SO17 1BJ

For more information regarding this event, please email Konstantinos Katsikopoulos at K.Katsikopoulos@southampton.ac.uk .

Event details

In portfolio decisions the goal is to select a best subset of projects using limited resources. We develop and test a number of fast and frugal heuristics - psychologically plausible models which use few pieces of information and combine these in computationally simple ways - for portfolio decisions. The proposed "add-the-best'' family of heuristics constructs a portfolio by iteratively adding a project that is best in a greedy sense, with various definitions of what is meant by "best''. Simulation and analytical results show that portfolios selected by some heuristics can be close to optimal under a range of reasonable conditions, and offer very substantial reductions in information requirements. Results from a behavioral laboratory experiment show that choices are often consistent with the use of heuristics. A main result is that a heuristic that begins by identifying projects involved in positive synergies with other projects, and then selects from these with an extremely simple value-to-cost ratio, performs excellently on both the quality of selected portfolios and on the information savings, relative to an optimal solution.

Speaker information

Ian Durbach, St Andrews, Cape Town, a Research Fellow at the Centre for Research into Ecological and Environmental Modelling at the University of St Andrews, and adjunct associate professor of statistical sciences at the University of Cape Town. His research focusses on uncertainty modelling in multicriteria decision analysis.

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