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Metaheuristic Approach to Solve Portfolio Selection Problem

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  • Taylan Kabbani

Abstract

In this paper, a heuristic method based on TabuSearch and TokenRing Search is being used in order to solve the Portfolio Optimization Problem. The seminal mean-variance model of Markowitz is being considered with the addition of cardinality and quantity constraints to better capture the dynamics of the trading procedure, the model becomes an NP-hard problem that can not be solved using an exact method. The combination of three different neighborhood relations is being explored with Tabu Search. In addition, a new constructive method for the initial solution is proposed. Finally, I show how the proposed techniques perform on public benchmarks

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  • Taylan Kabbani, 2022. "Metaheuristic Approach to Solve Portfolio Selection Problem," Papers 2211.17193, arXiv.org.
    • Handle: RePEc:arx:papers:2211.17193
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    File URL: http://arxiv.org/pdf/2211.17193
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    References listed on IDEAS

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    1. Majid M. Aldaihani & Talla M. Al-Deehani, 2010. "Mathematical models and a tabu search for the portfolio management problem in the Kuwait stock exchange," International Journal of Operational Research, Inderscience Enterprises Ltd, vol. 7(4), pages 445-462.
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