Portfolio selection by the means of cuckoo optimization algorithm

TL;DR

This paper applies the Cuckoo Optimization Algorithm to optimize stock portfolios in Tehran's stock market, demonstrating its effectiveness over genetic algorithms in maximizing returns.

Contribution

It introduces the use of the Cuckoo Optimization Algorithm for portfolio selection, comparing its performance to genetic algorithms in a real-world stock market context.

Findings

COA outperforms genetic algorithms in portfolio optimization

Optimal portfolios achieved higher returns using COA

Method applied to Tehran stock market data

Abstract

Portfolio selection is one of the most important and vital decisions that a real or legal person, who invests in stock market should make. The main purpose of this paper is the determination of the optimal portfolio with regard to stock returns of companies, which are active in Tehran's stock market. For achieving this purpose, annual statistics of companies' stocks since Farvardin 1387 until Esfand 1392 have been used. For analyzing statistics, information of companies' stocks, the Cuckoo Optimization Algorithm (COA) and Knapsack Problem have been used with the aim of increasing the total return, in order to form a financial portfolio. At last, results merits of choosing the optimal portfolio using the COA rather than Genetic Algorithm are given