Metaheuristic Approach to Solve Portfolio Selection Problem

11/10/2022

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by   Taylan Kabbani, et al.

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In this paper, a heuristic method based on TabuSearch and TokenRing Search is being used in order to solve the Portfolio Optimization Problem. The seminal mean-variance model of Markowitz is being considered with the addition of cardinality and quantity constraints to better capture the dynamics of the trading procedure, the model becomes an NP-hard problem that can not be solved using an exact method. The combination of three different neighborhood relations is being explored with Tabu Search. In addition, a new constructive method for the initial solution is proposed. Finally, I show how the proposed techniques perform on public benchmarks