Two-objective optimization of petrochemical portfolio with Strength Pareto Evolutionary Algorithm (SPEA2) by different approaches in portfolio selection
Subject Areas : Journal of Investment Knowledge
Arezou Karimi
1
(Master of Financial Mathematics, Faculty of Basic Sciences, University of Ayatollah Boroujerdi, Boroujerd, Iran.)
Fatemeh Zakipour
2
(Ph.D. Candidate in Applied Mathematics, Faculty of Mathematics, University of Kashan, Kashan, Iran.)
Keywords: MSV, MAD, MV, SPEA2 algorithm, CVaR,
Abstract :
The issue of choosing a portfolio is a multi-objective issue; Therefore, the need to know the methods of solving portfolio selection models is of great importance. Ultra-innovative algorithms are new ideas that were introduced in this regard. The multi-objective SPEA2 algorithm is one of the algorithms that solves the portfolio optimization problem. The purpose of this study is to use the SPEA2 multi-objective algorithm to achieve the desired combination of petrochemical companies in the petrochemical portfolio. The objective functions of the problem under study include the two objectives of maximizing returns and minimizing risk. The statistical sample includes data of 900 days of 12 petrochemical companies allowed to operate from 1/12/94 to 12/12/98, which by transferring this data to MATLAB software, the logarithmic return each stock is calculated and is the input of SPEA2 algorithm. Then the SPEA2 algorithm is implemented for each of the models of Mean-Variance, Mean-Semi Variance, Mean-Absolute Deviation, Mean- Conditional Value at Risk and the weight of each stock and risk and return of each portfolio are calculated. Then, using SPSS software, the mean difference between risk and return of the models was tested. The results show that the returns obtained by SPEA2 algorithm under different risk models are not statistically significant; However, the portfolio risk created by the SPEA2 algorithm under the Conditional Value at Risk model is significantly different from other risk measures and shows more risk.
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