IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v26y2021i4p5659-5665.html
   My bibliography  Save this article

A comparison on particle swarm optimization and genetic algorithm performances in deriving the efficient frontier of stocks portfolios based on a mean‐lower partial moment model

Author

Listed:
  • Armin Mahmoudi
  • Leila Hashemi
  • Milad Jasemi
  • James Pope

Abstract

In this paper, a portfolio optimization model on the basis of the risk measure of lower partial moment of the first order is discussed. Two meta‐heuristic methods of particle swarm optimization and genetic algorithm performances are applied and compared from different aspects to derive the stocks portfolios efficient frontier. The data belongs to the monthly returns of 20 randomly selected and approved stocks in the New York Stock Exchange for the financial period of 2005–2011. The results prove that both algorithms are quite efficient in solving the mean‐lower partial moment of the first order model with the particle swarm optimization being superior.

Suggested Citation

  • Armin Mahmoudi & Leila Hashemi & Milad Jasemi & James Pope, 2021. "A comparison on particle swarm optimization and genetic algorithm performances in deriving the efficient frontier of stocks portfolios based on a mean‐lower partial moment model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5659-5665, October.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:4:p:5659-5665
    DOI: 10.1002/ijfe.2086
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.2086
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.2086?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bertsimas, Dimitris & Lauprete, Geoffrey J. & Samarov, Alexander, 2004. "Shortfall as a risk measure: properties, optimization and applications," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1353-1381, April.
    2. Bawa, Vijay S., 1978. "Safety-First, Stochastic Dominance, and Optimal Portfolio Choice," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(2), pages 255-271, June.
    3. Unser, Matthias, 2000. "Lower partial moments as measures of perceived risk: An experimental study," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 253-280, June.
    4. Huang, Xiaoxia, 2008. "Portfolio selection with a new definition of risk," European Journal of Operational Research, Elsevier, vol. 186(1), pages 351-357, April.
    5. Ballestero, E. & Gunther, M. & Pla-Santamaria, D. & Stummer, C., 2007. "Portfolio selection under strict uncertainty: A multi-criteria methodology and its application to the Frankfurt and Vienna Stock Exchanges," European Journal of Operational Research, Elsevier, vol. 181(3), pages 1476-1487, September.
    6. Bawa, Vijay S., 1975. "Optimal rules for ordering uncertain prospects," Journal of Financial Economics, Elsevier, vol. 2(1), pages 95-121, March.
    7. Harlow, W. V. & Rao, Ramesh K. S., 1989. "Asset Pricing in a Generalized Mean-Lower Partial Moment Framework: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(3), pages 285-311, September.
    8. Grootveld, Henk & Hallerbach, Winfried, 1999. "Variance vs downside risk: Is there really that much difference?," European Journal of Operational Research, Elsevier, vol. 114(2), pages 304-319, April.
    9. Spreitzer, U.W. & Reznik, V., 2007. "On the optimization of a CAPM portfolio using lower partial moments as measure of risk and using the possibility of safeguarding its loss," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 378(2), pages 423-426.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abolfazl Gharaei & Alireza Amjadian & Ali Shavandi & Amir Amjadian, 2023. "An augmented Lagrangian approach with general constraints to solve nonlinear models of the large-scale reliable inventory systems," Journal of Combinatorial Optimization, Springer, vol. 45(2), pages 1-37, March.
    2. Fahad R. Albogamy, 2022. "Optimal Energy Consumption Scheduler Considering Real-Time Pricing Scheme for Energy Optimization in Smart Microgrid," Energies, MDPI, vol. 15(21), pages 1-31, October.
    3. Gholamreza Shojatalab & Seyed Hadi Nasseri & Iraj Mahdavi, 2022. "New multi-objective optimization model for tourism systems with fuzzy data and new algorithm for solving this model," OPSEARCH, Springer;Operational Research Society of India, vol. 59(3), pages 1018-1037, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shushang Zhu & Duan Li & Shouyang Wang, 2009. "Robust portfolio selection under downside risk measures," Quantitative Finance, Taylor & Francis Journals, vol. 9(7), pages 869-885.
    2. Anthonisz, Sean A., 2012. "Asset pricing with partial-moments," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 2122-2135.
    3. Robert Jarrow & Feng Zhao, 2006. "Downside Loss Aversion and Portfolio Management," Management Science, INFORMS, vol. 52(4), pages 558-566, April.
    4. Zhangxin (Frank) Liu & Michael J. O'Neill, 2018. "Partial moment volatility indices," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(1), pages 195-215, March.
    5. Hildebrandt, Patrick & Knoke, Thomas, 2011. "Investment decisions under uncertainty--A methodological review on forest science studies," Forest Policy and Economics, Elsevier, vol. 13(1), pages 1-15, January.
    6. Brogan, Anita J. & Stidham Jr., Shaler, 2008. "Non-separation in the mean-lower-partial-moment portfolio optimization problem," European Journal of Operational Research, Elsevier, vol. 184(2), pages 701-710, January.
    7. Basu, Anup K. & Drew, Michael E., 2010. "The appropriateness of default investment options in defined contribution plans: Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 18(3), pages 290-305, June.
    8. Ayub, Usman & Shah, Syed Zulfiqar Ali & Abbas, Qaisar, 2015. "Robust analysis for downside risk in portfolio management for a volatile stock market," Economic Modelling, Elsevier, vol. 44(C), pages 86-96.
    9. Cumova, Denisa & Nawrocki, David, 2011. "A symmetric LPM model for heuristic mean-semivariance analysis," Journal of Economics and Business, Elsevier, vol. 63(3), pages 217-236, May.
    10. Akhter Mohiuddin Rather & V. N. Sastry & Arun Agarwal, 2017. "Stock market prediction and Portfolio selection models: a survey," OPSEARCH, Springer;Operational Research Society of India, vol. 54(3), pages 558-579, September.
    11. Dragicevic, Arnaud Z., 2019. "Rethinking the forestry in the Aquitaine massif through portfolio management," Forest Policy and Economics, Elsevier, vol. 109(C).
    12. Capitani, Daniel H.D. & Mattos, Fabio, 2015. "Feasibility of new agricultural futures contract: a study in the Brazilian rice market," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205565, Agricultural and Applied Economics Association.
    13. Gonzalo, Jesús & Olmo, José, 2008. "Testing downside risk efficiency under market distress," UC3M Working papers. Economics we084321, Universidad Carlos III de Madrid. Departamento de Economía.
    14. Jules Sadefo Kamdem, 2023. "Risk-Adjusted Performance And Semi-Moments Of Non-Gaussian Portfolio Returns Distributions," Working Papers hal-04134833, HAL.
    15. Cumova, Denisa & Nawrocki, David, 2014. "Portfolio optimization in an upside potential and downside risk framework," Journal of Economics and Business, Elsevier, vol. 71(C), pages 68-89.
    16. Elie Matta & Jean McGuire, 2008. "Too Risky to Hold? The Effect of Downside Risk, Accumulated Equity Wealth, and Firm Performance on CEO Equity Reduction," Organization Science, INFORMS, vol. 19(4), pages 567-580, August.
    17. Jules Sadefo-Kamdem, 2011. "Downside Risk And Kappa Index Of Non-Gaussian Portfolio With Lpm," Working Papers hal-00733043, HAL.
    18. Schuhmacher, Frank & Auer, Benjamin R., 2014. "Sufficient conditions under which SSD- and MR-efficient sets are identical," European Journal of Operational Research, Elsevier, vol. 239(3), pages 756-763.
    19. Bertsimas, Dimitris & Lauprete, Geoffrey J. & Samarov, Alexander, 2004. "Shortfall as a risk measure: properties, optimization and applications," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1353-1381, April.
    20. León, Ángel & Moreno, Manuel, 2015. "Lower Partial Moments under Gram Charlier Distribution: Performance Measures and Efficient Frontiers," QM&ET Working Papers 15-3, University of Alicante, D. Quantitative Methods and Economic Theory.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:ijfiec:v:26:y:2021:i:4:p:5659-5665. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.