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What is Markovitz Mean Variance Theory

Metaheuristic Approaches to Portfolio Optimization
The Financial theory that is suggested by Markowitz. According to the theory, the investors should select the optimum portfolios that are appropriate for them, at a certain expected level of return, from the portfolios with the minimum and maximum returns at a certain risk level.
Published in Chapter:
The Genetic Algorithm: An Application on Portfolio Optimization
Burcu Adıguzel Mercangöz (Istanbul University, Turkey) and Ergun Eroglu (Istanbul University, Turkey)
Copyright: © 2019 |Pages: 25
DOI: 10.4018/978-1-5225-8103-1.ch007
Abstract
The portfolio optimization is an important research field of the financial sciences. In portfolio optimization problems, it is aimed to create portfolios by giving the best return at a certain risk level from the asset pool or by selecting assets that give the lowest risk at a certain level of return. The diversity of the portfolio gives opportunity to increase the return by minimizing the risk. As a powerful alternative to the mathematical models, heuristics is used widely to solve the portfolio optimization problems. The genetic algorithm (GA) is a technique that is inspired by the biological evolution. While this book considers the heuristics methods for the portfolio optimization problems, this chapter will give the implementing steps of the GA clearly and apply this method to a portfolio optimization problem in a basic example.
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