A multi-criteria decision model for fixed income sector allocation for endowment funds

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Applications of Management Science

ISSN: 0276-8976
Series editor(s): Professor Kenneth D. Lawrence

Subject Area: Management Science/Management Studies

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Document Information:
Title:	A multi-criteria decision model for fixed income sector allocation for endowment funds
Author(s):	Karen M. Hogan, Amy F. Lipton, Gerard T. Olson
Volume:	13 Editor(s): Kenneth D. Lawrence, Gary Kleinman ISBN: 978-1-84855-878-6 eISBN: 978-1-84855-879-3
Citation:	Karen M. Hogan, Amy F. Lipton, Gerard T. Olson (2009), A multi-criteria decision model for fixed income sector allocation for endowment funds, in Kenneth D. Lawrence, Gary Kleinman (ed.) Financial Modeling Applications and Data Envelopment Applications (Applications of Management Science, Volume 13), Emerald Group Publishing Limited, pp.71-85
DOI:	10.1108/S0276-8976(2009)0000013007 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
Abstract:	Bond investing requires decision-making on multiple levels. Some criteria are qualitative, some are quantitative, and there may be conflicting objectives such as avoidance of credit risk versus need for income. Since managers of endowment funds must allocate their assets based on numerous dimensions, a multi-criteria decision model can help to evaluate competing criteria. We describe the Analytical Hierarchy Process (AHP), which allows investors to integrate multiple decision criteria, and apply the model to the sector allocation problem faced by managers of endowment portfolios. The AHP gives rise to a flexible model for bond investors for a range of economic scenarios, risk profiles, and time horizons.