Empirical Study of Multi-Objective Risk Portfolio Optimization Based on NSGA-II
The purpose of the article. The application of multi-objective optimization in portfolio management has gained significant attention in asset management. This study aims to uncover the potential advantages of dynamic portfolio optimization using a multi-objective genetic algorithm to address the cha...
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| Format: | Article |
| Language: | deu |
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Lodz University Press
2024-12-01
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| Series: | Finanse i Prawo Finansowe |
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| Online Access: | https://czasopisma.uni.lodz.pl/fipf/article/view/24782 |
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| author | Qian Gao Aleš Kresta |
| author_facet | Qian Gao Aleš Kresta |
| author_sort | Qian Gao |
| collection | DOAJ |
| description | The purpose of the article. The application of multi-objective optimization in portfolio management has gained significant attention in asset management. This study aims to uncover the potential advantages of dynamic portfolio optimization using a multi-objective genetic algorithm to address the challenges of ever-changing market conditions.
Methodology. By incorporating multi-objective optimization, this paper comprehensively examines three key portfolio objectives: minimizing two risk types and maximizing returns. The approach involves constructing portfolios, initializing the population using the Non-Dominated Sorting Genetic Algorithm II (NSGA-II), and employing crossover and mutation steps to achieve Pareto optimality. Additionally, this study compares the performance of two risk minimization strategies through traditional portfolio backtesting.
Results of the research. The results indicate that the multi-objective risk genetic algorithm not only effectively explores the portfolio space but also handles conflicting optimization objectives, thereby enhancing the comprehensiveness and flexibility of investment decisions. However, its performance depended on the chosen risk measurement methods, and the backtesting returns were unstable. |
| format | Article |
| id | doaj-art-84324ccade7d4980b0db22eed7ccbaca |
| institution | Kabale University |
| issn | 2391-6478 2353-5601 |
| language | deu |
| publishDate | 2024-12-01 |
| publisher | Lodz University Press |
| record_format | Article |
| series | Finanse i Prawo Finansowe |
| spelling | doaj-art-84324ccade7d4980b0db22eed7ccbaca2025-01-29T13:37:24ZdeuLodz University PressFinanse i Prawo Finansowe2391-64782353-56012024-12-01617510.18778/2391-6478.S1.2024.0425352Empirical Study of Multi-Objective Risk Portfolio Optimization Based on NSGA-IIQian Gao0https://orcid.org/0009-0005-7857-1449Aleš Kresta1https://orcid.org/0000-0001-8621-3493Technical University of Ostrava, Faculty of Economics, Department of Finance Technical University of Ostrava, Faculty of Economics, Department of Finance The purpose of the article. The application of multi-objective optimization in portfolio management has gained significant attention in asset management. This study aims to uncover the potential advantages of dynamic portfolio optimization using a multi-objective genetic algorithm to address the challenges of ever-changing market conditions. Methodology. By incorporating multi-objective optimization, this paper comprehensively examines three key portfolio objectives: minimizing two risk types and maximizing returns. The approach involves constructing portfolios, initializing the population using the Non-Dominated Sorting Genetic Algorithm II (NSGA-II), and employing crossover and mutation steps to achieve Pareto optimality. Additionally, this study compares the performance of two risk minimization strategies through traditional portfolio backtesting. Results of the research. The results indicate that the multi-objective risk genetic algorithm not only effectively explores the portfolio space but also handles conflicting optimization objectives, thereby enhancing the comprehensiveness and flexibility of investment decisions. However, its performance depended on the chosen risk measurement methods, and the backtesting returns were unstable.https://czasopisma.uni.lodz.pl/fipf/article/view/24782portfolio optimizationrisk measuremulti-objectivensga-iiempirical study |
| spellingShingle | Qian Gao Aleš Kresta Empirical Study of Multi-Objective Risk Portfolio Optimization Based on NSGA-II Finanse i Prawo Finansowe portfolio optimization risk measure multi-objective nsga-ii empirical study |
| title | Empirical Study of Multi-Objective Risk Portfolio Optimization Based on NSGA-II |
| title_full | Empirical Study of Multi-Objective Risk Portfolio Optimization Based on NSGA-II |
| title_fullStr | Empirical Study of Multi-Objective Risk Portfolio Optimization Based on NSGA-II |
| title_full_unstemmed | Empirical Study of Multi-Objective Risk Portfolio Optimization Based on NSGA-II |
| title_short | Empirical Study of Multi-Objective Risk Portfolio Optimization Based on NSGA-II |
| title_sort | empirical study of multi objective risk portfolio optimization based on nsga ii |
| topic | portfolio optimization risk measure multi-objective nsga-ii empirical study |
| url | https://czasopisma.uni.lodz.pl/fipf/article/view/24782 |
| work_keys_str_mv | AT qiangao empiricalstudyofmultiobjectiveriskportfoliooptimizationbasedonnsgaii AT aleskresta empiricalstudyofmultiobjectiveriskportfoliooptimizationbasedonnsgaii |