Application of Pascoletti-Serafini scalarization modification method to solve multi-objective optimization problems for stock portfolio

Abstract

One example of a multi-objective optimization problem is stock portfolio management. There are at least two objective functions to be achieved simultaneously, namely to maximize returns and minimize risk. The desire to maximize return and minimize risk are conflicting objectives. In this study, the problem of multi-objective optimization in the selection of Islamic stock portfolios will use the Pascoletti-Serafini scalarization modification method. Furthermore, the solution to the multi objective optimization problem is known as the Pareto optimal solution or efficient solution. In the Pascoletti-Serafini scalarization modification method, a set of Pareto optimal solutions can be constructed so that not only one solution is offered to decision makers, but a set of Pareto optimal solutions. From this research, the results obtained in the form of a set of efficient solutions that can be used as investor preferences in choosing the optimal stock portfolio.