Papers › Solving Portfolio Optimization Problems Using MOEA/D and Levy Flight

Solving Portfolio Optimization Problems Using MOEA/D and Levy Flight

15 Mar 2020arXiv:2003.06737archive 2025-07-28

Yifan He, Claus Aranha

Portfolio optimization is a financial task which requires the allocation of capital on a set of financial assets to achieve a better trade-off between return and risk. To solve this problem, recent studies applied multi-objective evolutionary algorithms (MOEAs) for its natural bi-objective structure. This paper presents a method injecting a distribution-based mutation method named L\'evy Flight into a decomposition based MOEA named MOEA/D. The proposed algorithm is compared with three MOEA/D-like algorithms, NSGA-II, and other distribution-based mutation methods on five portfolio optimization benchmarks sized from 31 to 225 in OR library without constraints, assessing with six metrics. Numerical results and statistical test indicate that this method can outperform comparison methods in most cases. We analyze how Levy Flight contributes to this improvement by promoting global search early in the optimization. We explain this improvement by considering the interaction between mutation method and the property of the problem.

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Evolutionary AlgorithmsPortfolio Optimization

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