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.
|Date of creation:||2012|
|Publication status:||Published in Journal of Applied Finance & Banking no.4.vol.2(2012): pp. 143-154|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert Pereira, 2000.
"Genetic Algorithm Optimisation for Finance and Investment,"
2000.02, School of Economics, La Trobe University.
- Pereira, Robert, 2000. "Genetic Algorithm Optimisation for Finance and Investments," MPRA Paper 8610, University Library of Munich, Germany.
- Robert Pereira, 2000. "Genetic Algorithm Optimisation for Finance and Investment," Working Papers 2000.02, School of Economics, La Trobe University.
- Xiaolou Yang, 2006. "Improving Portfolio Efficiency: A Genetic Algorithm Approach," Computational Economics, Springer;Society for Computational Economics, vol. 28(1), pages 1-14, August.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03. Full references (including those not matched with items on IDEAS)
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