Analysis of decision making factors for equity investment by DEMATEL and Analytic Network Process

Existing methodologies of equity investment, such as fundamental analysis, technical analysis, and institutional investor analysis, explore important factors of stock price behaviors. However, the interdependent relationships of the key factors have not yet been fully studied. This paper provides the first analysis on the interactive relationships among the factors in incorporating the methods of Decision Making Trial and Evaluation Laboratory (DEMATEL) and Analytic Network Process (ANP). The empirical results show that factors from the existing analytical methodologies have significant interactive and self-feedback dynamics. Among the key factors, profitability is the most important one affecting investment decision, followed by growth and trading volume. In addition, due to the complexity of the ANP, this study proposes a new methodology to simplify the process, and empirical evidences indicate that the approach is effective and efficient.

Research highlights
► We provide the first analysis on the interactive relationships among the factors in incorporating the methods of DEMATEL and Analytic Network Process.
► We propose a new methodology to simplify the process, which is empirically shown effective and efficient.
► Factors from the existing analytical methodologies have significant interactive and self-feedback dynamics.
► Profitability is the most important one affecting investment decision, followed by growth and trading volume.