Using Swarm Algorithm to Build Efficient Portfolio

Abstract

The increase of financial investment induce the investors, financial analysts and specialists to look for Low-risk and High-return investment opportunities, represented as investment portfolios selected and built on scientific bases such portfolios represent the best way to minimize risks and maximize returns. They called as efficient and optimal portfolios. Many developments happened on the Markowitz theory; the researchers see that the portfolio investment needs to continuous developments. This paper discussed using the optimization algorithm to build the optimal portfolio by using the Swarm algorithm (PSO). The researchers tried to test the possibility to adapt PSO as one of modern approach to build the investment portfolio to reach its optimization and its efficiency. This paper contains theoretical framework, general introduction and some previous studies, some information about efficient and optimal investment portfolio, how to build these portfolios according to risk –and return trade off. The researchers reached encouraging results. The researchers analyzed data from Iraqi –stock Exchange (i.sx.iq). The results compared with published others about the same subject. Finally, the researchers concluded that there is an ability to apply this algorithm to build optimal investment portfolio.