Asset Allocation Model for a Robo-Advisor Using the Financial Market Instability Index and Genetic Algorithms
| Autor: | Wonbin Ahn, Hosun Ryou, Kyong Joo Oh, Hee Soo Lee |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
Computer science
lcsh:TJ807-830 Geography Planning and Development Risk parity lcsh:Renewable energy sources Asset allocation 02 engineering and technology Management Monitoring Policy and Law asset allocation Exchange rate 0502 economics and business genetic algorithm 0202 electrical engineering electronic engineering information engineering Econometrics lcsh:Environmental sciences lcsh:GE1-350 050208 finance Renewable Energy Sustainability and the Environment lcsh:Environmental effects of industries and plants Bond Sharpe ratio 05 social sciences Financial market lcsh:TD194-195 financial market instability index exchange traded funds Portfolio 020201 artificial intelligence & image processing Project portfolio management |
| Zdroj: | Sustainability Volume 12 Issue 3 Sustainability, Vol 12, Iss 3, p 849 (2020) |
| ISSN: | 2071-1050 |
| DOI: | 10.3390/su12030849 |
| Popis: | There has been a growing demand for portfolio management using robo-advisors, and hence, research on the automation of portfolio composition has been increasing. In this study, we propose a model that automates the portfolio structure by using the instability index of the financial time series and genetic algorithms (GAs). We use the instability index to filter the investment assets and optimize the threshold value used as a filtering criterion by applying a GA. For an empirical analysis, we use stocks, bonds, commodities exchange traded funds (ETFs), and exchange rate. We compare the performance of our model with that of risk parity and mean-variance models and find our model has better performance. Several additional experiments with our model using various internal parameters are conducted, and the proposed model with a one-month test period after one year of learning is found to provide the highest Sharpe ratio. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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