The Price of Risk: From Modern Portfolio Theory to Leveraged Portfolio Theory

2012 ◽  
Author(s):  
Olivier Le Marois ◽  
Julie Mikhalevsky ◽  
Raphael Douady
Keyword(s):  
Portfolio Theory ◽  
Modern Portfolio Theory ◽  
Price Of Risk

scholarly journals Robust Hybrid Optimization Method to Reduce Investment Portfolio Risk using Fusion of Modern Portfolio Theory and Genetic Algorithm

2019 ◽  
Vol 8 (6S3) ◽  
pp. 136-148
Keyword(s):  
Genetic Algorithm ◽  
Optimization Method ◽  
Portfolio Theory ◽  
Hybrid Optimization ◽  
Investment Risk ◽  
Portfolio Risk ◽  
Algorithm Optimization ◽  
Investment Portfolio ◽  
Genetic Algorithm Optimization ◽  
Modern Portfolio Theory

Main objective of this study is to develop hybrid optimization method for reducing investment portfolio risk. The methods selected in this study are the combination of Modern Portfolio Theory (MPT) and genetic algorithm optimization approach. Three stocks from Malaysian Stock Exchange are selected in developing the investment portfolio namely Malayan Banking Berhad, Hap Seng Consolidated Berhad and Top Glove Corporation Berhad. Result indicates the modern portfolio theory can give optimal portfolio weightage with maximum return for tolerate level of investment risk. In addition, genetic algorithm enhanced the optimal searching method to find global minimum of investment risk. Result shows the minimum portfolio risk in objective function is 2.122118 with implementation genetic algorithm optimization. The optimal combination of portfolio investment is 32.24 % in asset A (Malayan Banking Berhad), 52.37 % in asset B (Hap Seng Consolidated Berhad), and 15.30 % in asset C (Top Gove Corporation Berhad). The important of this study is it will assist investor in making better decision to optimize their return for given level of investment risk. Furthermore, this hybrid method provides a better accuracy of prediction for return of investment and portfolio risk.

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