Efficient Selection of Investment Portfolios in Real-World Markets: A Multi-Objective Optimization Approach

As financial markets become increasingly complex, optimizing investment portfolios under multiple conflicting objectives has become a central challenge for decision-makers. This paper presents a comprehensive benchmarking framework for multi-objective portfolio optimization based on metaheuristics, designed to operate on real-world financial data. This framework integrates preprocessing, and optimization using four state-of-the-art algorithms: NSGA-II, MOEA/D, SMS-EMOA, and SMPSO. Using historical data from over 11,000 assets listed on U.S. exchanges, including ARCA, NYSE, NASDAQ, OTC, AMEX, and BATS, we define a suite of benchmark scenarios with increasing dimensionality and constraint complexity. Our results highlight algorithmic strengths and limitations, reveal significant trade-offs between return and risk, and demonstrate the effectiveness of multi-objective metaheuristics in constructing diversified, high-performance investment portfolios. Each portfolio is encoded as a real-valued vector combining asset selection and allocation, enabling fine-grained diversification control. All datasets and source code are publicly available to ensure reproducibility.

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Publication Details

Journal
Algorithms
Published
2025-12-24
DOI
https://doi.org/10.3390/a19010020
Primary Topic
Risk and Portfolio Optimization
Type
article
Field-Weighted Citation Impact
0.00

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article

Efficient Selection of Investment Portfolios in Real-World Markets: A Multi-Objective Optimization Approach

José García-Nieto, Antonio J. Nebro, Antonio J. Hidalgo-Marín
Algorithms
Risk and Portfolio Optimization
article

Efficient Selection of Investment Portfolios in Real-World Markets: A Multi-Objective Optimization Approach

José García-Nieto, Antonio J. Nebro, Antonio J. Hidalgo-Marín
article en

Abstract

As financial markets become increasingly complex, optimizing investment portfolios under multiple conflicting objectives has become a central challenge for decision-makers. This paper presents a comprehensive benchmarking framework for multi-objective portfolio optimization based on metaheuristics, designed to operate on real-world financial data. This framework integrates preprocessing, and optimization using four state-of-the-art algorithms: NSGA-II, MOEA/D, SMS-EMOA, and SMPSO. Using historical data from over 11,000 assets listed on U.S. exchanges, including ARCA, NYSE, NASDAQ, OTC, AMEX, and BATS, we define a suite of benchmark scenarios with increasing dimensionality and constraint complexity. Our results highlight algorithmic strengths and limitations, reveal significant trade-offs between return and risk, and demonstrate the effectiveness of multi-objective metaheuristics in constructing diversified, high-performance investment portfolios. Each portfolio is encoded as a real-valued vector combining asset selection and allocation, enabling fine-grained diversification control. All datasets and source code are publicly available to ensure reproducibility.

AlgorithmsVol. 19(1)
Universidad de Málaga (ES), Software (Spain) (ES)
European Commission, Agencia Estatal de Investigación
Openalex Percentile: Top 29%
Risk and Portfolio Optimization
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