A hybrid algorithm for constrained portfolio selection problems

Lwin, Khin (2013) A hybrid algorithm for constrained portfolio selection problems. Applied Intelligence, 39 (2). pp. 251-266. ISSN 1573-7497

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Official URL: http://dx.doi.org/10.1007/s10489-012-0411-7


Since Markowitz’s seminal work on the mean-variance model in modern portfolio theory, many studies have been conducted on computational techniques and recently meta-heuristics for portfolio selection problems. In this work, we propose and investigate a new hybrid algorithm integrating the population based incremental learning and differential evolution algorithms for the portfolio selection problem. We consider the extended mean-variance model with practical trading constraints including the cardinality, floor and ceiling constraints. The proposed hybrid algorithm adopts a partially guided mutation and an elitist strategy to promote the quality of solution. The performance of the proposed hybrid algorithm has been evaluated on the extended benchmark datasets in the OR Library. The computational results demonstrate that the proposed hybrid algorithm is not only effective but also efficient in solving the mean-variance model with real world constraints.

Item Type: Journal Article
Keywords: Mean-variance portfolio optimization, Constrained portfolio selection problem, Cardinality constrained portfolio selection, Population based incremental learning, Differential evolution
Faculty: ARCHIVED Faculty of Science & Technology (until September 2018)
Depositing User: Dr Khin Lwin
Date Deposited: 09 Nov 2016 12:25
Last Modified: 07 Dec 2021 12:59
URI: https://arro.anglia.ac.uk/id/eprint/701062

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