Open AccessBinary Beetle Antennae Search Algorithm for Tangency Portfolio Diversification
Author(s) -
Vasilios N. Katsikis,
Spyridon D. Mourtas
Publication year - 2021
Publication title -
journal of modeling and optimization
Language(s) - English
Resource type - Journals
ISSN - 1759-7676
DOI - 10.32732/jmo.2021.13.1.44
Subject(s) - portfolio , diversification (marketing strategy) , cardinality (data modeling) , binary number , portfolio optimization , mathematical optimization , computer science , tangent , heuristic , nonlinear programming , algorithm , mathematics , nonlinear system , economics , data mining , finance , arithmetic , business , geometry , physics , marketing , quantum mechanics
The tangency portfolio, also known as the market portfolio, is the most efficient portfolio and arises from the intercept point of the Capital Market Line (CML) and the efficient frontier. In this paper, a binary optimal tangency portfolio under cardinality constraint (BOTPCC) problem is defined and studied as a nonlinear programming (NLP) problem. Because such NLP problems are widely approached by heuristic, a binary beetle antennae search algorithm is employed to provide a solution to the BTPSCC problem. Our method proved to be a magnificent substitute to other evolutionary algorithms in real-world datasets, based on numerical applications and computer simulations.