Advanced Algorithms in Designing and Creating Optimal Portfolios

Subject Areas : • Risk management and its new technologies

Reza Mansourian ¹

1 - Department of Accounting and Financial Engineering, South Tehran Branch, Islamic Azad University, Tehran, Iran

Received: 2024-06-30 Accepted : 2024-12-06 Published : 2024-12-20

Keywords: Smart Portfolio, Momentum Algorithm, Kalman Filter , kelly Creterion,

Abstract :

Objectives: Achieving sustained and long-term economic growth requires efficient resource allocation. This research aims to enhance optimization methods based on Sharpe Ratio performance and introduce an intelligent trading method utilizing various algorithms.

Design/methodology/approach: A quantitative investment model is developed using the Momentum Algorithm and a long-term investment model over a six-year horizon. The model is applied monthly from 2019 to 2023 within the stock exchange framework. Additionally, a series of smart models (Overall Functions, Overall Mean, and Overall Algorithm with Kalman Filter) are created to determine capital amounts using intelligent patterns.

Findings: The findings demonstrate that the proposed structure outperforms conventional algorithms, indicating it can serve as a viable alternative for achieving superior investment outcomes.

Innovation: This research contributes to the existing literature by introducing advanced optimization techniques that leverage intelligent algorithms for trading strategies. The findings provide new insights into capital allocation efficiency and risk management in financial markets.

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