Multi-Objective Quantum-Inspired Tabu Search for Trend Ratio Based Portfolio Optimization
Shu–Yu Kuo, Yong Feng Tong, Jyun–Yi Shen, Alvin Young, Yu-Chi Jiang, Yun-Ting Lai, Ming-Ho Chang, Yao–Hsin Chou · 2024
Quantum-inspired optimization (QIO) has garnered attention for attempting to retain quantum benefits on classical computers, thereby improving search efficiency in solving complex optimization problems. Portfolio optimization is one of the complicated real-world applications that concerns conflicting objectives of profit and risk simultaneously, making it a biobjective problem. This study exploits the advantage of the QIO to propose a multi-objective quantum-inspired tabu search algorithm (MoQTS) for constructing the Pareto front (PF) for portfolio optimization based on the innovative bi-objective trend ratio model. MoQTS initially employs the superposition encoding mechanism and Q-gate to search for potential areas quickly while maintaining the memory of PF information. Then, the entanglement move expands the search direction along with the current PF with more diversity. This study provides exhaustive search results to examine the completeness of optimal solutions in PF. The experimental results demonstrate that MoQTS exhibits competitive performance compared to classical methods across various metrics, including inverted generational distance (IGD), hypervolume (HV), and others. MoQTS shows significant potential in generating the PF using fewer computational resources.