Winnowing Algorithm – A Novel Natural Computing Algorithm for Portfolio Weight Optimization

12 Pages Posted: 14 Jun 2019

See all articles by Bharat Chawda

Bharat Chawda

Ph.D. Research Scholar, Computer Engineering, Gujarat Technological University

Jayeshkumar M. Patel

Associate Professor, MCA Programme, Ganpat University, Kherva – 384012, India

Date Written: March 20, 2019

Abstract

Selection of stocks and their weights to construct a stock market portfolio is the prime concern for investors and fund managers in a financial market. The underlying complexities of this problem have drawn the attention of researchers from various fields such as computer science, finance, and mathematics. The classical Mean-Variance model provides a mathematical formulation for this problem. As this problem is a multi-objective optimization problem, this model attempts to achieve dual goals – maximizing expected returns and minimizing risks. This paper presents a novel natural computing algorithm, inspired by the real world winnowing process, to optimize weights of the stocks to be included in a portfolio. The performance of this algorithm is tested on a standard dataset found in the literature. Obtained experimental results for this algorithm are compared and analyzed with other state-of-the-art algorithms. Conclusions derived from this analysis prove the reliability of the Winnowing Algorithm to accurately optimize portfolio weights.

Suggested Citation

Chawda, Bharat and M. Patel, Jayeshkumar, Winnowing Algorithm – A Novel Natural Computing Algorithm for Portfolio Weight Optimization (March 20, 2019). Proceedings of International Conference on Sustainable Computing in Science, Technology and Management (SUSCOM), Amity University Rajasthan, Jaipur - India, February 26-28, 2019. Available at SSRN: https://ssrn.com/abstract=3356745 or http://dx.doi.org/10.2139/ssrn.3356745

Bharat Chawda (Contact Author)

Ph.D. Research Scholar, Computer Engineering, Gujarat Technological University ( email )

K-6 Circle, E-4 Electronic Estate G.I.D.C, Sector
Chandkheda
Gandhinagar, GA Gujarat 382028
India

Jayeshkumar M. Patel

Associate Professor, MCA Programme, Ganpat University, Kherva – 384012, India ( email )

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