Global portfolio diversification by genetic relation algorithm

Victor Parque, Shingo Mabu, Kotaro Hirasawa

Research output: Chapter in Book/Report/Conference proceedingConference contribution

4 Citations (Scopus)

Abstract

Capital flows are increasingly intertwined globally and, consequently, have brought advantages to global investment strategies. Having a global view of portfolio allocation brings about the diversification of risks in investments. In this paper, a framework to select and optimize asset portfolios in relevant financial markets for short term investment is proposed. In this approach, beta portfolio is a measure of intertwined asset risks and Genetic Relation Algorithm is the evolutionary computing framework for building comprehensible and compact structures of global assets. The algorithm evaluates the relational beta coefficient among assets and generates a robust portfolio in the last generation. Simulations are done using stocks, bonds and currencies as three major asset classes, i.e., the data corresponding to relevant financial markets in USA, Europe and Asia, and the efficiency of the proposed method is compared with traditional Capital Asset Pricing Model(CAPM) for building portfolios.

Original languageEnglish
Title of host publicationICCAS-SICE 2009 - ICROS-SICE International Joint Conference 2009, Proceedings
Pages2567-2572
Number of pages6
Publication statusPublished - 2009 Dec 1
EventICROS-SICE International Joint Conference 2009, ICCAS-SICE 2009 - Fukuoka, Japan
Duration: 2009 Aug 182009 Aug 21

Publication series

NameICCAS-SICE 2009 - ICROS-SICE International Joint Conference 2009, Proceedings

Other

OtherICROS-SICE International Joint Conference 2009, ICCAS-SICE 2009
CountryJapan
CityFukuoka
Period09/8/1809/8/21

Keywords

  • Beta
  • CAPM
  • Genetic relation algorithm
  • Portfolio diversification

ASJC Scopus subject areas

  • Information Systems
  • Control and Systems Engineering
  • Industrial and Manufacturing Engineering

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  • Cite this

    Parque, V., Mabu, S., & Hirasawa, K. (2009). Global portfolio diversification by genetic relation algorithm. In ICCAS-SICE 2009 - ICROS-SICE International Joint Conference 2009, Proceedings (pp. 2567-2572). [5335326] (ICCAS-SICE 2009 - ICROS-SICE International Joint Conference 2009, Proceedings).