Multiobjective Evolutionary Algorithms for Portfolio Management: A comprehensive literature review

In this paper we provide a review of the current state of research on Portfolio Management with the support of Multiobjective Evolutionary Algorithms (MOEAs). Second we present a methodological framework for conducting a comprehensive literature review on the Multiobjective Evolutionary Algorithms (MOEAs) for the Portfolio Management. Third, we use this framework to gain an understanding of the current state of the MOEAs for the Portfolio Management research field and fourth, based on the literature review, we identify areas of concern with regard to MOEAs for the Portfolio Management research field.

[1]  Kalyanmoy Deb,et al.  A fast and elitist multiobjective genetic algorithm: NSGA-II , 2002, IEEE Trans. Evol. Comput..

[2]  Peter J. Fleming,et al.  Genetic Algorithms for Multiobjective Optimization: FormulationDiscussion and Generalization , 1993, ICGA.

[3]  Kalyanmoy Deb,et al.  A Fast Elitist Non-dominated Sorting Genetic Algorithm for Multi-objective Optimisation: NSGA-II , 2000, PPSN.

[4]  Richard F. Hartl,et al.  Pareto ant colony optimization with ILP preprocessing in multiobjective project portfolio selection , 2006, Eur. J. Oper. Res..

[5]  Hamid Reza Golmakani,et al.  Constrained Portfolio Selection using Particle Swarm Optimization , 2011, Expert Syst. Appl..

[6]  Kalyanmoy Deb,et al.  Portfolio optimization with an envelope-based multi-objective evolutionary algorithm , 2009, Eur. J. Oper. Res..

[7]  Qian Li,et al.  Enhanced index tracking based on multi-objective immune algorithm , 2011, Expert Syst. Appl..

[8]  Andrea G. B. Tettamanzi,et al.  A genetic approach to portfolio selection , 1993 .

[9]  Anthony Brabazon,et al.  An Introduction to Natural Computing in Finance , 2009, EvoWorkshops.

[10]  Tunchan Cura,et al.  Particle swarm optimization approach to portfolio optimization , 2009 .

[11]  Leszek Siwik,et al.  Generating Robust Investment Strategies with Agent-Based Co-evolutionary System , 2008, ICCS.

[12]  Massimiliano Kaucic,et al.  Investment using evolutionary learning methods and technical rules , 2010, Eur. J. Oper. Res..

[13]  Jeffrey Horn,et al.  The Niched Pareto Genetic Algorithm 2 Applied to the Design of Groundwater Remediation Systems , 2001, EMO.

[14]  Riccardo Poli,et al.  Genetic and Evolutionary Computation – GECCO 2004 , 2004, Lecture Notes in Computer Science.

[15]  Hamid Reza Golmakani,et al.  Markowitz-based portfolio selection with minimum transaction lots, cardinality constraints and regarding sector capitalization using genetic algorithm , 2009, Expert Syst. Appl..

[16]  Thomas Hanne,et al.  A multiobjective evolutionary algorithm for approximating the efficient set , 2007, Eur. J. Oper. Res..

[17]  Mohammad Ali Abido,et al.  Multiobjective evolutionary finance-based scheduling: Individual projects within a portfolio , 2011 .

[18]  Xavier Gandibleux,et al.  1984-2004 - 20 Years of Multiobjective Metaheuristics. But What About the Solution of Combinatorial Problems with Multiple Objectives? , 2005, EMO.

[19]  Peter Winker,et al.  New concepts and algorithms for portfolio choice , 1992 .

[20]  Kalyanmoy Deb,et al.  Muiltiobjective Optimization Using Nondominated Sorting in Genetic Algorithms , 1994, Evolutionary Computation.

[21]  Nikos S. Thomaidis.  Active Portfolio Management from a Fuzzy Multi-objective Programming Perspective , 2010, EvoApplications.

[22]  Kalyanmoy Deb,et al.  Simulated Binary Crossover for Continuous Search Space , 1995, Complex Syst..

[23]  Sean Pascoe,et al.  An investigation of genetic algorithms for the optimization of multi-objective fisheries bioeconomic models , 2000 .

[24]  Lothar Thiele,et al.  Comparison of Multiobjective Evolutionary Algorithms: Empirical Results , 2000, Evolutionary Computation.

[25]  Ronald Hochreiter,et al.  An Evolutionary Computation Approach to Scenario-Based Risk-Return Portfolio Optimization for General Risk Measures , 2009, EvoWorkshops.

[26]  José Antonio Lozano,et al.  A multiobjective approach to the portfolio optimization problem , 2005, 2005 IEEE Congress on Evolutionary Computation.

[27]  Zhong-Zhong Jiang,et al.  Multi-objective optimization matching for one-shot multi-attribute exchanges with quantity discounts in E-brokerage , 2011, Expert Syst. Appl..

[28]  C. Lucas,et al.  Heuristic algorithms for the cardinality constrained efficient frontier , 2011, Eur. J. Oper. Res..

[29]  Nuno Horta,et al.  Applying a GA kernel on optimizing technical analysis rules for stock picking and portfolio composition , 2011, Expert Syst. Appl..

[30]  Woo-Tsong Lin,et al.  Swarm Intelligence for Cardinality-Constrained Portfolio Problems , 2010, ICCCI.

[31]  Konstantinos P. Anagnostopoulos,et al.  A portfolio optimization model with three objectives and discrete variables , 2010, Comput. Oper. Res..

[32]  Peter Winker,et al.  Applications of optimization heuristics to estimation and modelling problems , 2004, Comput. Stat. Data Anal..

[33]  David E. Goldberg,et al.  A niched Pareto genetic algorithm for multiobjective optimization , 1994, Proceedings of the First IEEE Conference on Evolutionary Computation. IEEE World Congress on Computational Intelligence.

[34]  Lawrence J. Fogel,et al.  Intelligence Through Simulated Evolution: Forty Years of Evolutionary Programming , 1999 .

[35]  Philippe Artzner,et al.  Coherent Measures of Risk , 1999 .

[36]  Andreas Zell,et al.  Comparing Discrete and Continuous Genotypes on the Constrained Portfolio Selection Problem , 2004, GECCO.

[37]  Yves Crama,et al.  Simulated annealing for complex portfolio selection problems , 2003, Eur. J. Oper. Res..

[38]  J. David Schaffer,et al.  Multi-Objective Learning via Genetic Algorithms , 1985, IJCAI.

[39]  Shucheng Liu,et al.  Lagrangian relaxation procedure for cardinality-constrained portfolio optimization , 2008, Optim. Methods Softw..

[40]  David E. Goldberg,et al.  Genetic Algorithms in Search Optimization and Machine Learning , 1988 .

[41]  Andrea Roli,et al.  Hybrid Local Search for Constrained Financial Portfolio Selection Problems , 2007, CPAIOR.

[42]  Leszek Siwik,et al.  Comparison of Multi-agent Co-operative Co-evolutionary and Evolutionary Algorithms for Multi-objective Portfolio Optimization , 2009, EvoWorkshops.

[43]  Yazid M. Sharaiha,et al.  Heuristics for cardinality constrained portfolio optimisation , 2000, Comput. Oper. Res..

[44]  Jonathan E. Fieldsend,et al.  Cardinality Constrained Portfolio Optimisation , 2004, IDEAL.

[45]  Duan Li,et al.  OPTIMAL LOT SOLUTION TO CARDINALITY CONSTRAINED MEAN–VARIANCE FORMULATION FOR PORTFOLIO SELECTION , 2006 .

[46]  Andrea Schaerf,et al.  Local Search Techniques for Constrained Portfolio Selection Problems , 2001, ArXiv.

[47]  Kathrin Klamroth,et al.  An MCDM approach to portfolio optimization , 2004, Eur. J. Oper. Res..

[48]  Keshav P. Dahal,et al.  Portfolio optimization using multi-obj ective genetic algorithms , 2007, 2007 IEEE Congress on Evolutionary Computation.

[49]  Martin J. Oates,et al.  PESA-II: region-based selection in evolutionary multiobjective optimization , 2001 .

[50]  J. D. Schaffer,et al.  Some experiments in machine learning using vector evaluated genetic algorithms (artificial intelligence, optimization, adaptation, pattern recognition) , 1984 .

[51]  Ulrich Derigs,et al.  Meta-heuristic based decision support for portfolio optimization with a case study on tracking error minimization in passive portfolio management , 2003, OR Spectr..

[52]  Yue Qi,et al.  Suitable-portfolio investors, nondominated frontier sensitivity, and the effect of multiple objectives on standard portfolio selection , 2007, Ann. Oper. Res..

[53]  Abdullah Al Mamun,et al.  A realistic approach to evolutionary multiobjective portfolio optimization , 2007, 2007 IEEE Congress on Evolutionary Computation.

[54]  Alan D. Christiansen,et al.  An empirical study of evolutionary techniques for multiobjective optimization in engineering design , 1996 .

[55]  Abdullah Al Mamun,et al.  A memetic model of evolutionary PSO for computational finance applications , 2009, Expert Syst. Appl..

[56]  Kalyanmoy Deb,et al.  Multi-objective Genetic Algorithms: Problem Difficulties and Construction of Test Problems , 1999, Evolutionary Computation.

[57]  Lei. Peng,et al.  Investment portfolio optimization using genetic algorithm. , 2009 .

[58]  Seema Singh,et al.  Multi-objective mean–variance–skewness model for generation portfolio allocation in electricity markets , 2010 .

[59]  Abdullah Al Mamun,et al.  Investigating technical trading strategy via an multi-objective evolutionary platform , 2009, Expert Syst. Appl..

[60]  Kay Chen Tan,et al.  Evolutionary multi-objective portfolio optimization in practical context , 2008, Int. J. Autom. Comput..

[61]  Yi Wang,et al.  Particle Swarm Optimization (PSO) for the constrained portfolio optimization problem , 2011, Expert Syst. Appl..

[62]  Peng Shi,et al.  Using investment satisfaction capability index based particle swarm optimization to construct a stock portfolio , 2011, Inf. Sci..

[63]  Konstantinos P. Anagnostopoulos,et al.  Multiobjective evolutionary algorithms for complex portfolio optimization problems , 2011, Comput. Manag. Sci..

[64]  Christian Haubelt,et al.  Solving Hierarchical Optimization Problems Using MOEAs , 2003, EMO.

[65]  Jerzy J. Korczak,et al.  Performance Measures in an Evolutionary Stock Trading Expert System , 2004, International Conference on Computational Science.

[66]  Andrés L. Medaglia,et al.  A multiobjective evolutionary approach for linearly constrained project selection under uncertainty , 2007, Eur. J. Oper. Res..

[67]  Laurence A. Wolsey,et al.  Integration of AI and OR Techniques in Constraint Programming for Combinatorial Optimization Problems, 4th International Conference, CPAIOR 2007, Brussels, Belgium, May 23-26, 2007, Proceedings , 2007, CPAIOR.

[68]  Sang-Chin Yang,et al.  Portfolio optimization problems in different risk measures using genetic algorithm , 2009, Expert Syst. Appl..

[69]  John H. Holland,et al.  Outline for a Logical Theory of Adaptive Systems , 1962, JACM.

[70]  Hans-Paul Schwefel,et al.  Numerical Optimization of Computer Models , 1982 .

[71]  Martin J. Oates,et al.  The Pareto Envelope-Based Selection Algorithm for Multi-objective Optimisation , 2000, PPSN.

[72]  C. Coello,et al.  Multiobjective optimization using a micro-genetic algorithm , 2001 .

[73]  Amitabha Mukerjee,et al.  Multi–objective Evolutionary Algorithms for the Risk–return Trade–off in Bank Loan Management , 2002 .

[74]  Rolf Drechsler,et al.  Applications of Evolutionary Computing, EvoWorkshops 2008: EvoCOMNET, EvoFIN, EvoHOT, EvoIASP, EvoMUSART, EvoNUM, EvoSTOC, and EvoTransLog, Naples, Italy, March 26-28, 2008. Proceedings , 2008, EvoWorkshops.

[75]  Rafael Caballero,et al.  Solving a comprehensive model for multiobjective project portfolio selection , 2010, Comput. Oper. Res..

[76]  Gang Kou,et al.  An empirical study of classification algorithm evaluation for financial risk prediction , 2011, Appl. Soft Comput..

[77]  Shingo Mabu,et al.  A genetic relation algorithm with guided mutation for the large-scale portfolio optimization , 2009, 2009 ICCAS-SICE.

[78]  Yue Qi,et al.  Large-scale MV efficient frontier computation via a procedure of parametric quadratic programming , 2010, Eur. J. Oper. Res..

[79]  Lothar Thiele,et al.  Multiobjective evolutionary algorithms: a comparative case study and the strength Pareto approach , 1999, IEEE Trans. Evol. Comput..

[80]  Lawrence J. Fogel,et al.  Artificial Intelligence through Simulated Evolution , 1966 .

[81]  Jorge Pinho de Sousa,et al.  A multiobjective metaheuristic for a mean-risk multistage capacity investment problem with process flexibility , 2012, Comput. Oper. Res..

[82]  Andreas Zell,et al.  Evolutionary Algorithms and the Cardinality Constrained Portfolio Optimization Problem , 2004 .

[83]  Jürgen Branke,et al.  Efficient implementation of an active set algorithm for large-scale portfolio selection , 2008, Comput. Oper. Res..

[84]  Manfred Gilli,et al.  A Data-Driven Optimization Heuristic for Downside Risk Minimization , 2006 .

[85]  A. Roli,et al.  Metaheuristics for the Portfolio Selection Problem , 2008 .

[86]  Dimitris Bertsimas,et al.  Algorithm for cardinality-constrained quadratic optimization , 2009, Comput. Optim. Appl..

[87]  A. I. Kibzun,et al.  Analysis of criteria VaR and CVaR , 2006 .

[88]  Sergio Gómez,et al.  Portfolio selection using neural networks , 2005, Comput. Oper. Res..

[89]  Hans Kellerer,et al.  Optimization of cardinality constrained portfolios with a hybrid local search algorithm , 2003, OR Spectr..

[90]  Marco Laumanns,et al.  SPEA2: Improving the strength pareto evolutionary algorithm , 2001 .

[91]  W. Cannon.  The Wisdom of the Body , 1932 .

[92]  Chen Chen,et al.  Robust portfolio selection for index tracking , 2012, Comput. Oper. Res..

[93]  Detlef Seese,et al.  FINANCIAL APPLICATIONS OF MULTI-OBJECTIVE EVOLUTIONARY ALGORITHMS: RECENT DEVELOPMENTS AND FUTURE RESEARCH DIRECTIONS , 2004 .

[94]  Kalyanmoy Deb,et al.  Bi-objective Portfolio Optimization Using a Customized Hybrid NSGA-II Procedure , 2011, EMO.

[95]  Piero P. Bonissone,et al.  Multiobjective financial portfolio design: a hybrid evolutionary approach , 2005, 2005 IEEE Congress on Evolutionary Computation.

[96]  L. A. Balzer.  Measuring Investment Risk , 1994 .

[97]  G. Mitra,et al.  Computational aspects of alternative portfolio selection models in the presence of discrete asset choice constraints , 2001 .

[98]  Konstantinos P. Anagnostopoulos,et al.  The mean-variance cardinality constrained portfolio optimization problem: An experimental evaluation of five multiobjective evolutionary algorithms , 2011, Expert Syst. Appl..

[99]  Woo-Tsong Lin,et al.  Ant Colony Optimization for Markowitz Mean-Variance Portfolio Model , 2010, SEMCCO.

[100]  Gary B. Lamont,et al.  Evolutionary Algorithms for Solving Multi-Objective Problems , 2002, Genetic Algorithms and Evolutionary Computation.

[101]  Richard F. Hartl,et al.  Pareto Ant Colony Optimization: A Metaheuristic Approach to Multiobjective Portfolio Selection , 2004, Ann. Oper. Res..

[102]  Jih-Jeng Huang,et al.  A novel hybrid model for portfolio selection , 2005, Appl. Math. Comput..

[103]  Marco Laumanns,et al.  Why Quality Assessment Of Multiobjective Optimizers Is Difficult , 2002, GECCO.