Comparison of Markowitz and Genetic Algorithm Models for Saudi Arabian Stocks
DOI:
https://doi.org/10.69714/z0rwmk14Keywords:
Optimal Portfolio, Markowitz, Genetic Algorithm, Efficient Frontier, Saudi Arabian StocksAbstract
This study aims to compare the Markowitz method and the Genetic Algorithm in forming an optimal portfolio in the Saudi Arabian stock market, which is known to have dynamic characteristics and high levels of volatility due to the influence of economic reforms, oil price fluctuations, and integration with global markets. The study uses daily closing price data for companies indexed in the Tadawul All Share Index for the period January 2, 2022, to October 30, 2025, obtained through Yahoo Finance. Sample selection uses a purposive sampling method based on data completeness and Coefficient of Variation selection. The optimization process is carried out using the Python programming language through the Efficient Frontier Markowitz approach and the Genetic Algorithm. While portfolio performance evaluation is carried out using the Sharpe Ratio, Sortino Ratio, and Omega Ratio to obtain a more comprehensive assessment of risk and return efficiency. The results show that the Markowitz method tends to produce higher expected returns, but with a greater level of risk, while the Genetic Algorithm produces a portfolio with a relatively lower level of risk and more stability. Furthermore, conventional stock portfolios performed better than Islamic stock portfolios based on the performance ratio evalu-ation used. This finding suggests that portfolio optimization methods should be tailored to investor risk preferences and the characteristics of the investment market.
References
[1] Al-Faryan, M. A. (2021). Testing for efficiency in the Saudi stock market: Does corporate governance change matter? Review of Quanti-tative Finance and Accounting. 57(1), 61-90.
[2] Alkhudaydi, M. H. (2025). Investigating the dynamics and uncertainties in portfolio optimization using the Fourier–Mellin transform. PLOS ONE. 20(6).
[3] Anwar, A. (2022). Kerjasama Ekonomi Arab Saudi-Indonesia Dalam Bidang Investasi Dan Perdagangan (Bachelor's thesis, Program Studi Hubungan Internasional Fakultas Ilmu Sosial Dan Ilmu Politik Universitas Islam Negeri Syarif Hidayatullah Jakarta).
[4] Ardiansyah, I. (2025). Analisis Portofolio Optimal Dengan Model Markowitz Sebagai Dasar Kepu-Tusan Investasi Studi Kasus Pada Saham Indeks Investor33 Yang Terdaftar Di Bei Peri-Ode2022-2023 (Doctoral dissertation, Fakultas Ekonomi, Universitas Islam Sumatera Utara).
[5] Destina Paningrum, S. E. (2022). Buku referensi investasi pasar modal. Lembaga Chakra Brahmana Lentera.
[6] Erwin, K., & Engelbrecht, A. (2023). Meta-heuristics for portfolio optimization: K. Erwin, A. Engelbrecht. Soft Computing, 27(24), 19045-19073.
[7] Eri, Y. (2025). Penerapan Algoritma Genetika Dan Algoritma Greedy Dalam Menentukan Rute Terpendek Pendistribusian Air Mineral Kemasan Di Bandar Lampung.
[8] Fernandez, A., & Gómez, S. (2007). Portfolio selection using neural networks. Computers & operations research, 34(4), 1177-1191.
[9] Fiqri, R. R. (2025). Rancang bangun Expert Advisor berbasis strategi Exponential Moving Average (EMA) dan Relative StrengthIndex (RSI) dengan manajemen risiko adaptif pada instrumen XAUUSD (Doctoral dissertation, Universitas Islam Negeri Maulana Malik Ibrahim).
[10] Fransisca, D. C., Sukono, Chaerani, D., & Halim, N. A. (2024). Robust Portfolio Mean-Variance Optimization for Capital Allocation in Stock Investment Using the Genetic Algorithm: A Systematic Literature Review. Computation, 12(8), 166.
[11] Guarino, A., Santoro, D., Grilli, L., Zaccagnino, R., & Balbi, M. (2024). EvoFolio: a portfolio optimization method based on mul-ti-objective evolutionary algorithms. Neural Computing and Applications, 36(13), 7221-7243.
[12] Herawati, A., Amalia, A., Setiadi, D. K., Wicaksono, G., & Majid, H. A. (2025). Algoritma Evolusi untuk Masalah Optimasi. Jurnal Komputasi Cerdas, 1(1), 1-10.
[13] Lamouchi, R. A. (2020). Long memory and stock market efficiency: Case of Saudi Arabia. International Journal of Economics and Financial Issues, 10(3).
[14] Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), 77–91.
[15] Merry, W. (2025). Implementasi Algoritma Genetika Untuk Menyelesaikan Drone Routing Problem Implementation Genetic Algo-rithm To Solve Drone Routing Problem (Doctoral Dissertation, Universitas Sulawesi Barat).
[16] Mutmainah, S., Lorosae, T. A., & Citra, E. E. (2025). Genetic Algorithm Optimization for Solving the Traveling Salesman Problem in the Indonesian Business Environment. Journix: Journal of Informatics and Computing, 1(2), 88-98.
[17] Nur, R. I. (2024). Optimalisasi Kinerja Portofolio Saham Dengan Model Sigma Rin Dan Risk Adjusted Return (Doctoral disserta-tion, Universitas Hasanuddin).
[18] Nabila, A., Lorenza, A., Az-Zahra, F. G., & Yusmaniarti, Y. (2025). Efisiensi Portofolio Dengan Teori Markowitz: Studi Pada Saham Blue Chip Indonesia. Journal of Islamic Economics and Finance, 2(2), 331-342.
[19] Ramadhani, F. (2025). Perbandingan Kinerja Portofolio Optimal Menggunakan Single Index Model dan Capital Asset Pricing Model (CAPM) pada Saham IDX30 Periode 2021-2024= Comparison of Optimal Portfolio Performance Using the Single Index Model and Capital Asset Pricing Model (CAPM) on IDX30 Stocks for the 2021-2024 Period (Doctoral dissertation, Universitas Hasanuddin).
[20] Raya, N. A. M. (2025). Perbandingan Portofolio Optimal Metode Downside Deviation dan Markowitz dengan Evaluasi Kinerja melalui Indeks Sharpe pada Saham Blue Chip BEI 2020-2024= Comparison of Optimal Portfolios Using the Downside Deviation and Markowitz Methods with Performance Evaluation through the Sharpe Index on Blue-Chip Stocks Listed on the Indonesia Stock Exchange from 2020-2024 (Doctoral dissertation, Universitas Hasanuddin).
[21] Rishal, H. (2025). Penerapan Transformasi Hilbert dalam Optimasi Portofolio Metode Mean-Varians= Application of Hilbert Transform in Mean-Variance Portfolio Optimization (Doctoral dissertation, Universitas Hasanuddin).
[22] Sharpe, W. F. (1966). Mutual fund performance. The Journal of Business, 39(1), 119–138.
[23] Sortino, F. A. (1994). Performance measurement in a downside risk framework. The Journal of Investing, 3(3), 59–64.
[24] Syahla, R., Susanti, D., & Napitupulu, H. (2024). Optimization of Investment Portfolio Mean-Variance Model Using Genetic Al-gorithm. Int. J. Bus. Econ. Soc. Dev, 5, 227-234.
[25] Sista, A. A. W. (2025). Analisis Perbandingan Optimasi Portofolio Menggunakan Pendekatan Konvensional CAPM dan Pendekatan Machine learning LSTM-GARCH pada Indeks LQ45= Comparative Analysis Of Portfolio Optimization Using Conventional CAPM And Machine Learning-Based LSTM-GARCH Approach In LQ45 Index (Doctoral dissertation, Universitas Hasanuddin).
[26] Sugesti, R. (2024). Kinerja Portofolio Saham Pada Indeks Sektoral Menggunakan Single Indeks Model Dengan Metode Sharpe, Treynor, Dan Jensen (Doctoral dissertation, Universitas Bina Darma).
[27] Yanto, S., & Sari, P. I. (2025). Dinamika Price Limit dalam Ekosistem Investasi Pasar Modal. Bandar Lampung: HADLA Media Informasi.
[28] Zhao, Y., Wang, J., Wang, Y., & Lv, M. (2025). How to optimize modern portfolio theory? A systematic review and research agen-da. Expert Systems with Applications, 263, 125780.
Downloads
Published
Issue
Section
License
Copyright (c) 2026 Journal of Management Economics and Financial Accounting
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
