Mean-Maximum Drawdown Optimization of Buy-and-Hold Portfolios Using a Multi-objective Evolutionary Algorithm

Mikica Drenovak, Vladimir Ranković, Branko Urošević and Ranko Jelic

Finance Research Letters, 2022, vol. 46, issue PA

Abstract: We develop a novel Mean-Max Drawdown portfolio optimization approach using buy-and-hold portfolios. The optimization is performed utilizing a multi-objective evolutionary algorithm on a sample of S&P 100 constituents. Our optimization procedure provides portfolios with better Mean-Max Drawdown trade-offs compared to relevant benchmarks, regardless of the selected subsamples and market conditions. The superior performance of our approach is particularly pronounced in periods with reversing market trends (i.e. a market rally and a fall in the same subsample).

Keywords: Maximum drawdown; Genetic algorithm; Portfolio optimization; Risk management (search for similar items in EconPapers)
JEL-codes: C61 G11 G18 G23 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003500

DOI: 10.1016/j.frl.2021.102328

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