Extended mean–variance model for reliable evolutionary portfolio optimization

Real world optimization of financial portfolios pose a challenging multiobjective problem that can be tackled using Evolutionary Algorithms. The fact that the optimization process is subject to the presence of uncertainty concerning asset returns is likely to lead to unreliable solutions. This work...

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Bibliographic Details
Published inAi communications Vol. 27; no. 3; pp. 315 - 324
Main Authors García, Sandra, Quintana, David, Galván, Inés M., Isasi, Pedro
Format Journal Article
LanguageEnglish
Published London, England SAGE Publications 01.01.2014
Subjects
robustness
Multiobjective evolutionary algorithms
financial portfolio optimization
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Summary:Real world optimization of financial portfolios pose a challenging multiobjective problem that can be tackled using Evolutionary Algorithms. The fact that the optimization process is subject to the presence of uncertainty concerning asset returns is likely to lead to unreliable solutions. This work suggests extending the classic mean–variance optimization problem with a third explicit robustness objective. This results on sets of portfolios that can be subsequently grouped together according to their reliability. This additional information allows for a better informed decision making regarding asset allocation.
ISSN:0921-7126
1875-8452
DOI:10.3233/AIC-140600