Optimum Portfolio Selection using a Hybrid Genetic Algorithm and Analytic Hierarchy Process: An Application to Amman Stock Exchange

Prof. Said Sami Al hallaq; Mohamad Mahmoud Ajlouni; Mahmoud Faheem Al Saadi

Optimum Portfolio Selection using a Hybrid Genetic Algorithm and Analytic Hierarchy Process: An Application to Amman Stock Exchange

Prof. Said Sami Al hallaq *

Contact

Mohamad Mahmoud Ajlouni

Contact

Mahmoud Faheem Al Saadi

Contact

Optimum Portfolio Selection using a Hybrid Genetic Algorithm and Analytic Hierarchy Process: An Application to Amman Stock Exchange

Article Fingerprint

ReserarchID

MBR4S27I

Optimum Portfolio Selection using a Hybrid Genetic Algorithm and Analytic Hierarchy Process: An Application to Amman Stock Exchange Banner

Key Research Insights

Synthesized scholarly intelligence & interactive research assistant

Abstract

The aim of this study is to investigate the ability of a hybrid genetic algorithm (HGA) and analytic hierarchy process (AHP) in selecting the optimum portfolio. This of course, helps investors to decide the most appropriate investment alternatives. For that purpose, the study creates portfolios using daily returns of the companies listed in Amman Stock Exchange, for the period from January 1, 2015 to December 31, 2015. The results show that HGA can identify portfolios that are in the efficient frontier.HGA has more advantages than disadvantages for the portfolio selection cases in which the scale of the problem or the nonlinear constraints cannot be solved by linear or quadratic models. In addition, the results reveal that AHP can select the optimum portfolio among the portfolios obtained by HGA.

References

62 Cites in Article

Reference Format

Yalcin Akcay,Atakan Yalcin (2010). OPTIMAL PORTFOLIO SELECTION WITH A SHORTFALL PROBABILITY CONSTRAINT: EVIDENCE FROM ALTERNATIVE DISTRIBUTION FUNCTIONS.
D Alrabadi (2016). Portfolio Optimization using the Generalized Reduced Gradient Nonlinear Algorithm: An application to Amman Stock Exchange.
Fischer Black,Myron Scholes (1973). The Pricing of Options and Corporate Liabilities.
K Brown,Reilly (2008). Analysis of Investments and Management of Portfolios.
M Gopalakrishnan (2011). Optimal Portfolio Selection Using Sharpe’s Single Index Model.
L Chyi,J Robinson,R Reed (2008). Downside Beta and the Cross-Sectional Determinants of Listed Property Trust Returns.
M Davis,A Norman (1990). Portfolio Selection with Transaction Costs.
Werner De Bondt,Richard Thaler (1985). Does the Stock Market Overreact?.
V Demiguel,Y Plyakha,R Uppal,G &vilkov (2013). Improving Portfolio Selection using Option-Implied Volatility and Skewness.
R Desai,Lele,F Ens (2003). A Monte-Carlo Method for Portfolio Optimization under Partially Observed Stochastic Volatility.
N Edirisinghe (2013). Index-tracking optimal portfolio selection.
E Edwin,J Martin (1997). Modern Portfolio Theory, 1950 to Date.
Matthias Ehrgott,Kathrin Klamroth,Christian Schwehm (2004). An MCDM approach to portfolio optimization.
J Elton,M Gruber,S Brown,Goetzmann (1995). Modern Portfolio Theory and Investment Analysis.
Tarek El-Mihoub,Adrian Hopgood,Lars Nolle,Alan Battersby (2006). Self-Adaptive Baldwinian Search in Hybrid Genetic Algorithms.
E Fama (1970). Efficient Capital Markets: A Review of Theory and Empirical Work.
E Fama (1965). The Behavior of Stock Prices.
E Fama,B Malkiel (1970). Efficient Markets: A Review of Theory and Empirical Work.
D Fard (2006). Portfolio Selection and Optimization with Genetic Algorithm: The Case of Alborz Insurance Company.
N Ghaffari-Nasab,S Ahari,A Makui (2011). A Portfolio Selection using Fuzzy Analytic Hierarchy Process: A Case Study of Iranian Pharmaceutical Industry.
David Goldberg,Kalyanmoy Deb (1989). A Comparative Analysis of Selection Schemes Used in Genetic Algorithms.
R Hagstrom (2001). The essential Buffett: timeless principles for the new economy.
M Harry (1990). Autobiography, The Nobel Prizes.
A Haugen (2001). Modern Investment Theory.
Gwangheon Hong,Sudipto Sarkar (2007). Equity Systematic Risk (Beta) and Its Determinants*.
G Isiklar,G Büyükzkan (2007). Using a Multi-Criteria Decision Making Approach to Evaluate Mobile Phone Alternatives.
Dogyu Jang,Dongphil Chun (2016). A Study on the Development Plan of the Footwear Industry in the Southeast Region: Using SWOT－AHP Analysis Method.
Michael Jensen (1968). THE PERFORMANCE OF MUTUAL FUNDS IN THE PERIOD 1945–1964.
Javed Kamal (2012). Optimal Portfolio Selection in Ex Ante Stock Price Bubble and Furthermore Bubble Burst Scenario from Dhaka Stock Exchange with Relevance to Sharpe’s Single Index Model.
Raymond Kan,Xiaolu Wang,Guofu Zhou (2016). Optimal Portfolio Selection with and without Risk-Free Asset.
Ming-Chang Lee,Li-Er Su (2014). Capital Market Line Based on Efficient Frontier of Portfolio with Borrowing and Lending Rate.
M Levinson (2006). Guide to Financial Markets.
John Lintner (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets.
J Maginn,D Tuttle,D Mc Celvey,J Pinto (1990). Process and Behaviors.
R Manganelli (2002). Solving the Corporate Value Enigma: A System to Unlock Stockholder Value.
H Markowitz (1959). Portfolio Selection: Efficient Diversification of Investments.
Harry Markowitz (1991). Foundations of Portfolio Theory.
H Markowitz (1991). Portfolio Selection -2nd Edition.
Harry Markowitz (1952). PORTFOLIO SELECTION*.
Jan Mossin (1966). Equilibrium in a Capital Asset Market.
C Papahristodoulou,E Dotzauer (2004). Optimal portfolios using linear programming models.
D Pappas,K Kiriakopoulos,G Kaimakamis (2010). Optimal Portfolio Selection with Singular Covariance Matrix.
J Peavy (1990). Cases in Portfolio Management.
Nooshin Rahmani,Alireza Talebpour,Taher Ahmadi (2012). Developing aMulti Criteria Model for Stochastic IT Portfolio Selection by AHP Method.
F Reilly,K Brown (2006). Investment Analysis and Portfolio Management.
Richard Roll (1977). A critique of the asset pricing theory's tests Part I: On past and potential testability of the theory.
Richard Roll (1978). Ambiguity when Performance is Measured by the Securities Market Line.
Stephen Ross (1976). The arbitrage theory of capital asset pricing.
O Rytchkov (2016). Time-Varying Margin Requirements and Optimal Portfolio Choice.
T Saaty (1980). The Analytic Hierarchy Process.
R Saaty (1987). The analytic hierarchy process—what it is and how it is used.
Rajendra Sahu,Mohit Jain,Geshu Garg (2006). Optimal portfolio allocation using portfolio theory and heuristics driven evolutionary technique.
H Scholz (2007). Refinements to the Sharpe ratio: Comparing alternatives for bear markets.
William Sharpe (1964). CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*.
W Sharpe (1966). Mutual fund performance.
Maghsoud Solimanpur,Gholamreza Mansourfar,Farzad Ghayour (2015). Optimum portfolio selection using a hybrid genetic algorithm and analytic hierarchy process.
Nassim Taleb (2007). Black Swans and the Domains of Statistics.
J Treynor (1965). How to Rate Management of Investment Funds.
L Vargas (1990). An Overview of the Analytic Hierarchy Process and its Applications.
Shuping Wan (2009). Optimal portfolio model under compound jump processes.
X Yao,Y Liu (1996). Fast Evolutionary Programming.
Bo Yi,Frederi Viens,Baron Law,Zhongfei Li (2015). Dynamic portfolio selection with mispricing and model ambiguity.

Download References

Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Prof. Said Sami Al hallaq, Mohamad Mahmoud Ajlouni, Mahmoud Faheem Al Saadi. 2021. "Optimum Portfolio Selection using a Hybrid Genetic Algorithm and Analytic Hierarchy Process: An Application to Amman Stock Exchange". Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 21 (GJMBR Volume 21 Issue C1).

More Citation Formats

Select Citation Style:

Download Citation

GJMBR Volume 21 Issue C1

Explore Journals Explore Volume Read This Issue

Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

Not Found

Classification

GJMBR-C Classification JEL Code: F65

Submission ReceivedJune 12, 2021
Peer Review Double Blind
Handling Editor
Accepted July 4, 2021
Published July 15, 2021

Version of record

v1.2

Issue date

January 16, 2021

Language

English

Experiance in AR

Explore published articles in an immersive Augmented Reality environment. Our platform converts research papers into interactive 3D books, allowing readers to view and interact with content using AR and VR compatible devices.

View in VR

Read in 3D

Your published article is automatically converted into a realistic 3D book. Flip through pages and read research papers in a more engaging and interactive format.

View in 3D

Article Matrices

Total Views: 500

Total Downloads: 45

All Trends