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A GA-PLS Method for the Index Tracking Problem

  • Zhe Chen
  • Shizhu Liu
  • Jiangang Shen
  • Shenghong Li
Conference paper
  • 1.7k Downloads
Part of the Communications in Computer and Information Science book series (CCIS, volume 143)

Abstract

Index tracking is a popular problem for funds, especially for index tracker funds. In this paper, we introduced GA-PLS method to solve the index tracking problem. This method consists of genetic algorithm (GA) and partial least squares (PLS). For a portfolio constructed by specified stocks, we used PLS regression to determine their weights in this portfolio. And we used GA to determine which stocks should be chosen to optimize the tracking effect of the portfolio. Results showed that the tracking portfolio constructed by GA-PLS has good performances on both in-sample and out-of-sample data.

Keywords

Index tracking Genetic algorithm Partial least squares 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Zhe Chen
    • 1
  • Shizhu Liu
    • 2
  • Jiangang Shen
    • 1
  • Shenghong Li
    • 1
  1. 1.Deparment of MathematicsZhejiang UniversityHangzhouChina
  2. 2.Deparment of EconomicsZhejiang UniversityHangzhouChina

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