TAILIEUCHUNG - Portfolio selection using genetic algorithm

The selection of optimal portfolios is the central problem of financial investment decisions. Mathematically speaking, portfolio selection refers to the formulation of an objective function that determines the weights of the portfolio invested in each asset as to maximize return and minimize risk. This paper applies the method of genetic algorithm (GA) to obtain an optimal portfolio selection. However, the GA parameters are of great importance in the procedure of convergence of this algorithm towards the optimal solution such as crossover. While, a five stock portfolio example is used in this paper to illustrate the applicability and efficiency of genetic algorithm method, GA method can also be used however for a larger number of portfolio compositions. The results obtained confirm previous research studies about the validity and efficiency of genetic algorithm in selecting optimal portfolios. | Journal of Applied Finance Banking 2012 143-154 ISSN 1792-6580 print version 1792-6599 online Scienpress Ltd 2012 Portfolio Selection Using Genetic Algorithm Slimane Sefiane1 and Mohamed Benbouziane2 Abstract The selection of optimal portfolios is the central problem of financial investment decisions. Mathematically speaking portfolio selection refers to the formulation of an objective function that determines the weights of the portfolio invested in each asset as to maximize return and minimize risk. This paper applies the method of genetic algorithm GA to obtain an optimal portfolio selection. However the GA parameters are of great importance in the procedure of convergence of this algorithm towards the optimal solution such as crossover. While a five stock portfolio example is used in this paper to illustrate the applicability and efficiency of genetic algorithm method GA method can also be used however for a larger number of portfolio compositions. The results obtained confirm previous research studies about the validity and efficiency of genetic algorithm in selecting optimal portfolios. JEL classification numbers G11 Keywords portfolio optimization objective function artificial intelligence methods genetic algorithm 1 Introduction Portfolio optimization is one of the most challenging problems in the field of finance. Selecting the weights of assets to invest in a portfolio as to meet the 1 University of Relizane Algeria e-mail ssefiane@ 2 University of Tlemcen Algeria e-mail mbenbouziane@ Article Info Received April 29 2012. Revised June 3 2012 Published online August 31 2012 144 Portfolio Selection Using Genetic Algorithm expectations about risk and return makes this problem more crucial. In dealing with this problem Harry Markowitz 1959 developed a quantitative model also called mean-variance model. The mean-variance model has been usually considered as either the minimization of an objective function representing the portfolio

• Tài chính doanh nghiệp
• Portfolio optimization
• Objective function
• Artificial intelligence methods
• Genetic algorithm
• Portfolio selection using genetic algorithm
• Mean variance optimization
• Optimal portfolio
• Minimum variance portfolio
• Asset allocation
• Portfolio selection model
• Modern portfolio theory
• Financial modeling
• Lecture Financial modeling
• Asset expected return
• Portfolio risk return optimization
• Modeling support
• Tạp chí khoa học
• mathematical programming
• single objective optimization
• multi objective optimization
• computational optimization methods
• Portfolio theory
• Cone optimization
• Discuss portfolio optimization
• Quadratic Programming
• Second Order Cone Programming
• Policyholder behaviour
• Renewal price
• Evolutionary computation
• Differential evolution
• Monte carlo optimization
• Portfolio selection
• Behavioral optimization model
• Fuzzy multiple criteria decision making
• Analytical hierarchy process
• Financial quality score
• Maxi mum entropy Approach
• Financial instruments
• Heuristic maximum entropy approach
• Non negative
• Note on fano ratio
• Generalized mean to risk
• Mean to risk
• Pedagogical fashion – gener alized
• Income portfolio
• Portfolio duration
• Bond functions
• Exponential synergistic effect
• Project portfolio selection problem
• Real world problem
• Organizations’ financial and physical constraints
• Primarily portfolio optimization problem
• Project Portfolio Selection
• Data mining tool
• Multiple Criteria Decision Making
• Portfolio of project
• NSGA II algorithm
• Mining and energy sector
• Risk free assets
• Value at risk
• Quadratic investment portfolio based
• Financial management
• Multinational financial management
• Quản lý tài chính
• Quản lý tài chính đa quốc gia
• Multinational finance
• Global portfolio optimization
• Monte carlo simulation
• Equity markets
• Markowitz classical mathematical
• Optimization techniques
• Statistical arbitrage
• Optimization procedure
• Global investments
• Statistical arbitrage models
• Collateralized Debt
• Correlation Smile
• Evolutionary Algorithms
• Optimization
• Basic Algorithms
• Parallel Algorithms
• Financial Derivatives
• Convex Optimization
• Quadratic Hedging Principles
• Quadratic Investment Principles
• Risk Measurement Principles
• Risk return relationship
• Robust estimation
• Deficiencies in classical finance
• Classical finance
• Electronic Engineering
• Renewable energy
• Uncertain conditions
• Investment efficiency
• Data Envelopment Analysis
• Monte Carlo