An Investment Decision Making System

This paper describes the design, implementation and evaluation of a system for the management of pension funds by a large institutional investor. As a direct result of this management science based system, which had been in operation for over three years prior to this study, the jobs of security analysts, portfolio managers and the management of the investment function were significantly changed. The institution publicly acknowledged the success of this system in its annual reports and internally acknowledged the additional business revenues generated by this new approach to money management. Three major aspects of this research which spanned a period of over six years are discussed. Initially the behavioral science analysis which helped to determine why classic portfolio selection or equity valuation models had not been accepted by the organization is reviewed. This phase also contains an analysis of the necessary changes to information flows and job responsibilities before the organization could reasona...