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Simulated annealing algorithm for optimal capital growth

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  • Luo, Yong
  • Zhu, Bo
  • Tang, Yong

Abstract

We investigate the problem of dynamic optimal capital growth of a portfolio. A general framework that one strives to maximize the expected logarithm utility of long term growth rate was developed. Exact optimization algorithms run into difficulties in this framework and this motivates the investigation of applying simulated annealing optimized algorithm to optimize the capital growth of a given portfolio. Empirical results with real financial data indicate that the approach is inspiring for capital growth portfolio.

Suggested Citation

  • Luo, Yong & Zhu, Bo & Tang, Yong, 2014. "Simulated annealing algorithm for optimal capital growth," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 408(C), pages 10-18.
    • Handle: RePEc:eee:phsmap:v:408:y:2014:i:c:p:10-18
    DOI: 10.1016/j.physa.2014.04.020
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    References listed on IDEAS

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