Stock Portfolio Optimization with Using a New Hybrid Evolutionary Algorithm Based on ICA and GA: Recursive-ICA-GA (Case Study of Tehran Stock Exchange)

15 Pages Posted: 27 May 2012  

Mostafa Emami

Islamic Azad University - Young Research Club; University of Texas at Dallas - Department of Economics & Finance; Tarbiat Modares University

Amrollah Amini

Allame Tabatabaei University

Alireza Emami

University of Tehran

Date Written: May 26, 2012

Abstract

How to allocate resources and select the type of investment is very important . The optimal allocation, especially in the financial markets of countries that are paced growth factor, is very significance. In this research toward optimizing resource allocation, an innovative learning algorithm will used to select and optimize portfolio in Tehran Stock Exchange. a new method is proposed based on the combination of ICA (Imperial Competitive Algorithm) and GA (Genetic Algorithm) which improves the convergence speed and accuracy of the optimization results. The new algorithm, which is named R-ICGA (Recursive- ICA-GA), runs ICA and GA consecutively. It is shown that a fast decrease occurs while the proposed algorithm switches from ICA to GA. The main goal of the new proposed algorithm is to achieve a faster optimization technique by applying this fast decrease. Moreover, the simple combination of ICA and GA, which is named ICA-GA, is presented in this study. These two combination schemes of ICA and GA are used for comparing with other conventional algorithms. Finally, three fitness functions are used for comparing the suggested algorithms. The obtained results show that compared with the previous method, the proposed algorithms are at least 32% faster in optimization processes; also the variance convergence speed is smaller than the ICA and GA.

Suggested Citation

Emami, Mostafa and Amini, Amrollah and Emami, Alireza, Stock Portfolio Optimization with Using a New Hybrid Evolutionary Algorithm Based on ICA and GA: Recursive-ICA-GA (Case Study of Tehran Stock Exchange) (May 26, 2012). Available at SSRN: https://ssrn.com/abstract=2067126 or http://dx.doi.org/10.2139/ssrn.2067126

Mostafa Emami (Contact Author)

Islamic Azad University - Young Research Club ( email )

1400 Townsend Drive
25
TEHRAN, teh 1767778151
Iran
+1(816) 237-0018 (Phone)
+98(21) 8978-5800 (Fax)

HOME PAGE: http://scholar.google.com/citations?user=UBypdMgAAAAJ&hl=en

University of Texas at Dallas - Department of Economics & Finance ( email )

Richardson, TX 75083
United States
+1(816) 237-0018 (Phone)
98(21) 89785800 (Fax)

HOME PAGE: http://scholar.google.com/citations?user=UBypdMgAAAAJ&hl=en

Tarbiat Modares University ( email )

University Jalale-Ale-Ahmad Express Way Tehran
P.O.Box: 14115-111, Tehran, Iran
Iran P.O.Box. 14115-316, TX 1767778151
Iran
+1(816) 237-0018 (Phone)
98(21) 89785800 (Fax)

HOME PAGE: http://scholar.google.com/citations?user=UBypdMgAAAAJ&hl=en

Amrollah Amini

Allame Tabatabaei University ( email )

Olympic Boulevard
Tehran, 1489684511
Iran

Alireza Emami

University of Tehran ( email )

Amirabad e shomali, kuye daneshgah e Tehran
Tehran, Tehran 5433174616
Iran

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