TITLE:
Finding the Efficient Frontier for a Mixed Integer Portfolio Choice Problem Using a Multiobjective Algorithm
AUTHORS:
K. P. ANAGNOSTOPOULOS, G. MAMANIS
KEYWORDS:
Markowitz Model, Multiobjective Optimization, NSGA, Portfolio Selection
JOURNAL NAME:
iBusiness,
Vol.1 No.2,
December
18,
2009
ABSTRACT: We propose a computational procedure to find the efficient frontier for the standard Markowitz mean-variance model with discrete variables. The integer constraints limit on the one hand the portfolio to contain a predetermined number of assets and, on the other hand, the proportion of the portfolio held in a given asset. We adapt the multiobjective algorithm NSGA for solving the problem. The algorithm ranks the solutions of each generation in layers based on Pareto non-domination. We have applied the procedure in sixty assets of ATHEX. We have also compared the algorithm with a single genetic algorithm. The computational results indicate that the procedure is promising for this class of problems.