Project Appraisement of Venture Investment by Analytic Hierarchy Process and Factor Analysis

This paper aims to compare the differences between analytic hierarchy process (AHP) and factor analysis in assessing venture investment program. By introducing AHP into venture investment program evaluation, we can assess different types of risk in a single model, which can reduce complexity in multi-attribute decision making. Factor analysis can be employed to reduce redundant information of various types of risk, and establish linear relationship between the random variables (risk variables) and the risk value of the program. Factor analysis has the advantages of simplifying the process of risk decomposition and being easily implemented in commercial statistical software packages (e.g., SPSS). More importantly, investment companies' preference can be taken into consideration in factor analysis.