A combinatorial algorithm for the cardinality constrained portfolio optimization problem

Research output: Chapter in Book/Conference proceedingConference contributionpeer-review

20 Citations (Scopus)

Abstract

Portfolio optimization is an important problem based on the modern portfolio theory (MPT) in the finance field. The idea is to maximize the portfolio expected return as well as minimizing portfolio risk at the same time. In this work, we propose a combinatorial algorithm for the portfolio optimization problem with the cardinality and bounding constraints. The proposed algorithm hybridizes a metaheuristic approach (particle swarm optimization, PSO) and a mathematical programming method where PSO is used to deal with the cardinality constraints and the math programming method is used to deal with the rest of the model. Computational results are given for the benchmark datasets from the OR-library and they indicate that it is a useful strategy for this problem. We also present the solutions obtained by the CPLEX mixed integer program solver for these instances and they can be used as the criteria for the comparison of algorithms for the same problem in the future.

Original languageEnglish
Title of host publicationProceedings of the 2014 IEEE Congress on Evolutionary Computation, CEC 2014
PublisherInstitute of Electrical and Electronics Engineers Inc.
Pages491-498
Number of pages8
ISBN (Electronic)9781479914883
DOIs
Publication statusPublished - 16 Sept 2014
Event2014 IEEE Congress on Evolutionary Computation, CEC 2014 - Beijing, China
Duration: 6 Jul 201411 Jul 2014

Publication series

NameProceedings of the 2014 IEEE Congress on Evolutionary Computation, CEC 2014

Conference

Conference2014 IEEE Congress on Evolutionary Computation, CEC 2014
Country/TerritoryChina
CityBeijing
Period6/07/1411/07/14

Keywords

  • Cardinality Constrained Portfolio Optimization
  • Constrained problem
  • Particle swarm optimization

ASJC Scopus subject areas

  • Artificial Intelligence
  • Computational Theory and Mathematics
  • Theoretical Computer Science

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