Abstract:

In this paper, a market volatility-robust investment portfolio composition approach under the modified Markowitz’s framework with the use of sampling methods and genetic algorithms is developed in order to enhance the efficiency of allocation in a financial instruments portfolio at an increased market volatility. In order to surpass the risk of acquiring suboptimal outcomes in attribution of proportions in a portfolio formulation procedure the developed model depends on many input samples of rates of return that are further implemented in evolution simulations based on the survival-of-the-fittest principle. As proved, the suggested approach produces more diversified allocation and more efficiently minimises the unfavourable effects of an increased market volatility in comparison to Newton’s method. Stated research contributes to existing allocation techniques and directly addresses the task of minimising the adverse implications of increased market volatility what allows for a rational investment decision-making. Importantly, the suggested approach holds capacity for further development.