Solving Periodic Investment Portfolio Selection Problems by a Data-Assisted Multiobjective Evolutionary Approach

Abstract

Classic portfolio selection problems mainly focus on high-risk financial markets with tradeoffs between returns and risk. However, more risk-averse investors pursue long-term portfolio planning with the objectives of maximizing final returns and maximizing flexibility. This article addresses a new type of the portfolio problem, called periodic investment portfolio selection problems (PIPSPs), in which investors periodically allocate resources to financial products with different periods. A multiobjective model for PIPSPs is first presented. With a mechanism for utilizing the data generated during the implementation of multiobjective evolutionary algorithms (MOEAs), a data-assisted MOEA (DA-MOEA) is proposed to solve PIPSPs. The main idea of a DA-MOEA is to combine a MOEA with a data-assisted process that consists of three components: 1) feature construction; 2) data fusion model development; and 3) obtained information utilization. To solve the addressed PIPSPs, two versions of DA-MOEAs with baselines of nondominated sorting and decomposition-based mechanisms are implemented, namely, the data-assisted NSGA-II (DA-NSGA-II) and data-assisted MOEA/D (DA-MOEA/D). In the developed DA-MOEAs for PIPSPs, a feature construction process and a data fusion model are well designed for mining data with different formats. To validate the algorithms, two sets of test instances are generated. The experimental results demonstrate the efficacy of the data-assisted process. Furthermore, the effects of the algorithm components, such as the data source sizes, information types, and information utilization strategies, are investigated.