Cardinality constrained portfolio optimization with a hybrid scheme combining a Genetic Algorithm and Sonar Inspired Optimization

Christos Konstantinou (), Alexandros Tzanetos () and Georgios Dounias ()
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Christos Konstantinou: University of the Aegean
Alexandros Tzanetos: University of the Aegean
Georgios Dounias: University of the Aegean

Operational Research, 2022, vol. 22, issue 3, No 27, 2465-2487

Abstract: Abstract The constraints and the vast solution space of operational research optimization problems make them hard to cope with. However, Computational Intelligence, and especially Nature-Inspired Algorithms, has been a useful tool to tackle hard and large space optimization problems. In this paper, a very consistent and effective hybrid optimization scheme to tackle cardinality constrained portfolio optimization problems is presented. This scheme consists of two nature-inspired algorithms, i.e. Sonar Inspired Optimization algorithm and Genetic Algorithm. Also, the incorporation of heuristic information, i.e. an expert’s knowledge, etc., to the overall performance of the hybrid scheme is tested and compared to previous studies. More specifically, under the framework of a financial portfolio optimization problem, the heuristic information-enhanced hybrid scheme manages to reach a new optimal solution. Additionally, a comparison of the proposed hybrid scheme with other hybrid schemes applied to the same problem with the same data is performed.

Keywords: Portfolio optimization; Sonar inspired optimization; Genetic algorithm; Hybrid algorithms; Nature-inspired algorithms (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s12351-020-00614-1

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