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Sectorial portfolio analysis with genetic algorithms: case applied to the Mexican Stock Exchange

Author

Listed:
  • Rodríguez García Martha del Pilar

    () (Universidad Autónoma de Nuevo León)

  • Cortez Alejandro Klender Aimer

    () (Universidad Autónoma de Nuevo León)

  • Méndez Sáenz Alma Berenice

    () (Universidad Autónoma de Nuevo León)

  • Garza Sánchez Héctor Horacio

    () (Universidad Autónoma de Nuevo León)

Abstract

The type of industry, size of company, number of employees, etc. are variables that are considered as control variables in a large number of articles. In this research we consider the sector variable as a determinant of financial performance (Baird et al. 2012) and the risk (Artikis and Nifora, 2011) rather than as a control variable. This paper analyzes six sectors of the Mexican economy divided according to the Mexican Stock Exchange: industrial, basic consumer products, materials, non basic consumer products, telecommunications and financial services. The sample consists of Mexican companies, that is, 30 companies in the 2007-2012 period. To measure portfolio performance two classic indicators are used: (1) Jensen alpha and (2) Sharpe ratio, and also conditional metrics are used that measures the number of times the portfolio return exceeds the market average. The goal is to find a portfolio that maximizes these parameters and compare the results between the different sectors under study. Due to a nonlinear programming problem, genetic algorithms are used to obtain the optimal portfolio that maximizes these metrics. The results show a better risk-adjusted financial performance in the field of materials and financial services and a lower performance in such sectors as the industrial and telecommunications ones.

Suggested Citation

  • Rodríguez García Martha del Pilar & Cortez Alejandro Klender Aimer & Méndez Sáenz Alma Berenice & Garza Sánchez Héctor Horacio, 2015. "Sectorial portfolio analysis with genetic algorithms: case applied to the Mexican Stock Exchange," Contaduría y Administración, Accounting and Management, vol. 60(1), pages 87-112, enero-mar.
  • Handle: RePEc:nax:conyad:v:60:y:2015:i:1:p:87-112
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