Investing in New Companies in an Unstable Economic Environment: A Fuzzy Set Approach

Abstract

In this paper we propose a strategy for investing in new companies for which there is relatively little hard data available. We use fuzzy set theory to represent these new companies as finite fuzzy subsets of established companies for which there is a history of investment data. A fuzzy set is also used to represent the economic environment in which the proposed new investments will be made. From this fuzzy information we construct a fuzzy expected return for each new investment under consideration. These expected returns are then defuzzified, and those proposed investments whose defuzzified expected returns fail to meet some specified criteria are discarded. An investment strategy is then proposed for investing available capital in those new companies that meet the criteria.

Citation

Kleyle, R., de Korvin, A. and Karim, K. (1997), "Investing in New Companies in an Unstable Economic Environment: A Fuzzy Set Approach", Managerial Finance, Vol. 23 No. 6, pp. 68-80. https://doi.org/10.1108/eb018631