Paper Info
Title
Regularized hypervolume selection for robust portfolio optimization in dynamic environments
Abstract
This paper proposes a regularized hypervolume (SMetric) selection algorithm. The proposal is used for incorporating stability and diversification in financial portfolios obtained by solving a temporal sequence of multi-objective Mean Variance Problems (MVP) on real-world stock data, for short to longterm rebalancing periods. We also propose the usage of robust statistics for estimating the parameters of the assets returns distribution so that we are able to test two variants (with and without regularization) on dynamic environments under different levels of instability. The results suggest that the maximum attaining Sharpe Ratio portfolios obtained for the original MVP without regularization are unstable, yielding high turnover rates, whereas solving the robust MVP with regularization mitigated turnover, providing more stable solutions for unseen, dynamic environments. Finally, we report an apparent conflict between stability in the objective space and in the decision space.
Year
DOI
Venue
2013
10.1109/CEC.2013.6557823
IEEE Congress on Evolutionary Computation
Keywords
Field
DocType
dynamic programming,investment,parameter estimation,statistical analysis,MVP,SMetric selection algorithm,asset return distribution,dynamic environments,financial portfolio diversification,financial portfolio stability,long-term rebalancing periods,multiobjective mean variance problems,parameter estimation,real-world stock data,regularization mitigated turnover,regularized hypervolume selection algorithm,sharpe ratio portfolios,Multi-objective optimization,dynamic environments,indicator-based search,mean-variance problem,portfolio optimization,regularization,robust statistics
Dynamic programming,Mathematical optimization,Computer science,Selection algorithm,Robust statistics,Regularization (mathematics),Portfolio optimization,Sharpe ratio,Estimation theory,Statistical analysis
Conference
ISBN
Citations 
PageRank 
978-1-4799-0452-5
1
0.35
References 
Authors
14
2
Name
Order
Citations
PageRank
Carlos R. B. Azevedo1274.49
Von Zuben, F.J.211412.19