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Optimization of Stock Portfolio Selection in Iran Capital Market Using Meta-heuristic Algorithms

Author

Listed:
  • Mostafaei Darmian, Sobhan

    (Master of Industrial Engineering, University of Kurdistan)

  • Doaei , Meysam

    (Assistant Professor of Financial Management, Islamic Azad University, Esfarayen Branch)

Abstract

The purpose of this study is to optimize the portfolio in companies listed on the Iran capital market (Tehran Stock Exchange and Iran Farabours) as a multi-objective optimization problem. The first objective function includes risk minimization and the second objective function includes return maximization. The limitations of the model include the limitation of selecting companies individually as well as the limitation of budget. In order to solve the problem, two genetic metaheuristic algorithms and a gray wolf have been developed, which are analyzed using numerical examples taken from 491 companies listed on the Tehran Stock Exchange and the Iran Farabours market from April 26, 2016 to December 21, 2022 were subjected to numerical analysis. According to the numerical results, it can be seen that the gray wolf algorithm has a higher efficiency than the genetic algorithm in all examples. It is noteworthy, however, that in none of the numerical examples did the percentage of unwarranted responses in the algorithm improvement procedure exceed 10.2%. Also, the percentage improvement of the gray wolf algorithm compared to the genetic algorithm is reported to be between 3 and 11%.

Suggested Citation

  • Mostafaei Darmian, Sobhan & Doaei , Meysam, 2022. "Optimization of Stock Portfolio Selection in Iran Capital Market Using Meta-heuristic Algorithms," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 8(4), pages 253-284, March.
    • Handle: RePEc:ris:qjatoe:0254
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    More about this item

    Keywords

    Portfolio Optimization; Genetic Algorithm; Gray Wolf Algorithm; Tehran Stock Exchange and Iran Farabours;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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