A squirrel search algorithm for the multi-objective portfolio optimisation with transaction costs

Portfolio optimisation (PO) is the problem of deciding how much of an investor’s wealth should be invested in each asset amongst a universe of assets so as to obtain a reasonable trade-off between return and risk objectives. In this paper, we address this problem including real-life constraints such...

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Main Authors: M. Nassir-Ud-Diin Ebrahim Saïb, Ashvin Gopaul, Jayrani Cheeneebash
Format: Article
Language:English
Published: Elsevier 2024-06-01
Series:Scientific African
Subjects:
Online Access:http://www.sciencedirect.com/science/article/pii/S246822762400111X
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author M. Nassir-Ud-Diin Ebrahim Saïb
Ashvin Gopaul
Jayrani Cheeneebash
author_facet M. Nassir-Ud-Diin Ebrahim Saïb
Ashvin Gopaul
Jayrani Cheeneebash
author_sort M. Nassir-Ud-Diin Ebrahim Saïb
collection DOAJ
description Portfolio optimisation (PO) is the problem of deciding how much of an investor’s wealth should be invested in each asset amongst a universe of assets so as to obtain a reasonable trade-off between return and risk objectives. In this paper, we address this problem including real-life constraints such as cardinality, quantity and pre-assignment constraints by making use of an improved version of the Squirrel Search Algorithm (SSA) described in the literature. The novelty of this work is the application of the improved SSA in the multi-objective portfolio optimisation problem together with transaction costs. There are four major improvements from the classical SSA with the aim of better global convergence ability. The first improvement is to consider the predator presence probability as a variable, the second is to generate the squirrels’ position by using a cloud generator. The third and fourth improvements consist of selecting the best squirrel following successive iteration and to find the optimal dimensions of the position of the best flying squirrel. We test the performance of the algorithm with seven publicly available datasets drawn from two different sources and compare the results with well-known heuristics and the standard SSA. The results obtained proved the efficacy and superiority of the improved algorithm considering both the cases with and without transaction costs. The improved SSA (ISSA) obtained smaller generational distance and inverted generational distance when compared to SSA for most of the test problems except for the S&P 100 index. In terms of the hypervolume indicator it can be seen that the ISSA outperformed all the algorithms as it obtained higher values for all the test problems. For the spacing metric ISSA performed better for most datasets.
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spelling doaj.art-98090b3b3d6b4b11bcf471c7042e21fc2024-03-21T05:37:16ZengElsevierScientific African2468-22762024-06-0124e02166A squirrel search algorithm for the multi-objective portfolio optimisation with transaction costsM. Nassir-Ud-Diin Ebrahim Saïb0Ashvin Gopaul1Jayrani Cheeneebash2Corresponding author.; Department of Mathematics, University of Mauritius, Réduit, MauritiusDepartment of Mathematics, University of Mauritius, Réduit, MauritiusDepartment of Mathematics, University of Mauritius, Réduit, MauritiusPortfolio optimisation (PO) is the problem of deciding how much of an investor’s wealth should be invested in each asset amongst a universe of assets so as to obtain a reasonable trade-off between return and risk objectives. In this paper, we address this problem including real-life constraints such as cardinality, quantity and pre-assignment constraints by making use of an improved version of the Squirrel Search Algorithm (SSA) described in the literature. The novelty of this work is the application of the improved SSA in the multi-objective portfolio optimisation problem together with transaction costs. There are four major improvements from the classical SSA with the aim of better global convergence ability. The first improvement is to consider the predator presence probability as a variable, the second is to generate the squirrels’ position by using a cloud generator. The third and fourth improvements consist of selecting the best squirrel following successive iteration and to find the optimal dimensions of the position of the best flying squirrel. We test the performance of the algorithm with seven publicly available datasets drawn from two different sources and compare the results with well-known heuristics and the standard SSA. The results obtained proved the efficacy and superiority of the improved algorithm considering both the cases with and without transaction costs. The improved SSA (ISSA) obtained smaller generational distance and inverted generational distance when compared to SSA for most of the test problems except for the S&P 100 index. In terms of the hypervolume indicator it can be seen that the ISSA outperformed all the algorithms as it obtained higher values for all the test problems. For the spacing metric ISSA performed better for most datasets.http://www.sciencedirect.com/science/article/pii/S246822762400111XPortfolio optimisationMulti-objectiveSquirrel search algorithmNormal cloud generatorTransaction cost
spellingShingle M. Nassir-Ud-Diin Ebrahim Saïb
Ashvin Gopaul
Jayrani Cheeneebash
A squirrel search algorithm for the multi-objective portfolio optimisation with transaction costs
Scientific African
Portfolio optimisation
Multi-objective
Squirrel search algorithm
Normal cloud generator
Transaction cost
title A squirrel search algorithm for the multi-objective portfolio optimisation with transaction costs
title_full A squirrel search algorithm for the multi-objective portfolio optimisation with transaction costs
title_fullStr A squirrel search algorithm for the multi-objective portfolio optimisation with transaction costs
title_full_unstemmed A squirrel search algorithm for the multi-objective portfolio optimisation with transaction costs
title_short A squirrel search algorithm for the multi-objective portfolio optimisation with transaction costs
title_sort squirrel search algorithm for the multi objective portfolio optimisation with transaction costs
topic Portfolio optimisation
Multi-objective
Squirrel search algorithm
Normal cloud generator
Transaction cost
url http://www.sciencedirect.com/science/article/pii/S246822762400111X
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