Portfolio Optimization Using Fundamental Indicators Based on Multi-Objective EA

1. Front Matter

   Pages i-xvii

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2. Introduction

   • António Daniel Silva, Rui Ferreira Neves, Nuno Horta

   Pages 1-4

3. Literature Review

   • António Daniel Silva, Rui Ferreira Neves, Nuno Horta

   Pages 5-37

4. System Architecture

   • António Daniel Silva, Rui Ferreira Neves, Nuno Horta

   Pages 39-56

5. Multi-objective Optimization

   • António Daniel Silva, Rui Ferreira Neves, Nuno Horta

   Pages 57-72

6. Results

   • António Daniel Silva, Rui Ferreira Neves, Nuno Horta

   Pages 73-87

7. Conclusions and Future Work

   • António Daniel Silva, Rui Ferreira Neves, Nuno Horta

   Pages 89-90

8. Back Matter

   Pages 91-95

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This work presents a new approach to portfolio composition in the stock market. It incorporates a fundamental approach using financial ratios and technical indicators with a Multi-Objective Evolutionary Algorithms to choose the portfolio composition with two objectives the return and the risk. Two different chromosomes are used for representing different investment models with real constraints equivalents to the ones faced by managers of mutual funds, hedge funds, and pension funds. To validate the present solution two case studies are presented for the SP&500 for the period June 2010 until end of 2012. The simulations demonstrates that stock selection based on financial ratios is a combination that can be used to choose the best companies in operational terms, obtaining returns above the market average with low variances in their returns. In this case the optimizer found stocks with high return on investment in a conjunction with high rate of growth of the net income and a high profit margin. To obtain stocks with high valuation potential it is necessary to choose companies with a lower or average market capitalization, low PER, high rates of revenue growth and high operating leverage

• Computational Finance
• Financial Statements
• Fundamental Analysis
• Multi-objective evolutionary Algorithm
• Portfolio Composition
• algorithm analysis and problem complexity
• quantitative finance

• /Instituto Superior Técnico, Instituto de Telecomunicações, Lisbon, Portugal

  Antonio Daniel Silva

• Instituto Superior Técnico, Instituto de Telecomunicações, Lisbon, Portugal

  Rui Ferreira Neves

• Instituto Superior Técnico, Instituto de Telecomunicações/, Lisbon, Portugal

  Nuno Horta

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