Research on optimal portfolios based on optimization and Simulated Annealing Algorithm A comparison of optimal portfolios between the Chinese and American stock market

Abstract

This paper is aimed to show the correctness of our model, which combines optimization and the Simulated Annealing Algorithm and uses it to compare the American stock market with the Chinese stock market. Furthermore, we want to use this model to construct an optimal portfolio and expect to determine if it is general. We select nine stocks for both American and Chinese stock markets and use them to construct optimal portfolios. The study results show that the optimal portfolio based on the Sharpe ratio is optimal for these stock markets. Furthermore, this research study finds a strong correlation and significant differences between these stock markets.