Adaptive improved portfolio Sharpe ratio maximization with diversification

A portfolio selection method called Improved Portfolio Sharpe Ratio Maximization with Diversification (IPSRM-D) was recently proposed by Hung et al. (1999). It is derived from the original Sharpe Ratio design by taking into consideration the upside volatility and investment diversification. It can obtain investment decision according to the investor´s position in the return-risk trade off. However, the batchway method used in IPSRM-D lacks the ability to keep tracing the changes in market from the just available data. In this paper, we further the study on IPSRM-D by introducing various adaptive methods. We demonstrate with experimental results on stock market that adaptive methods outperform batchway method in profit gain