none

　　Markowitz Mean-Variance Model is a well-known investment theory in selecting security portfolio while the normal distribution of the return is one of the mainly assumptions. Therefore we also try to apply Genetic Algorithms (GA), one of artificial intelligence methodology, to the investment portfolio.
　　This paper investigates the ability of security selection by comparing the performance of the portfolios of fund of funds (FoF) constructed by Markowitz Mean-Variance Model or GA to that of fund managers. All target mutual funds held by FoF in the U.S. market from January 1, 2000, to December 31, 2003 are chosen in this study.
　　The results imply some things. First, only GA model and Mean-Variance model can beat the market index and the performance of GA model is much better than that of fund managers and Mean-Variance model. Second, for the ability of selecting security, both Markowitz Mean-Variance and GA models can outperform the operation of fund managers. Finally, GA model may dominate Markowitz Mean-Variance model in performance measure and performance persistence.

Allen F. and Karjalainen R., “Using Genetic Algorithms to Find Technical Trading Rules”, Journal of Financial Economics, Vol. 51, pp. 245~271,1999.
Benari, Yoav, “Optimal asset mix and its link to changing fundamental fact.” Journal of Portfolio Management. New York: Winter. Vol. 16, Iss. 2; pg. 11, 8 pgs,1990.
Bers, M. K., and J. Madura, “The performance persistence of close-end funds”, The Financial Review 35, 33-52, 2000.
Bers, M. K., and J. Madura, “The performance persistence of foreign close-end funds”, Review of Finacial Economics 11, 263-285, 2001.
Bian, Jyh-Shang, “An Genetic-Algorithm Model for Taiwan Stock Index” M.A. thesis, Graduate Institute of Information Management, National Chiao Tung University, Hsinchu, Taiwan), in Chinese,1995.
Brown, S. J., and W. N. Goetzmann, “Performance persistence”, Journal of Finance 50, 679-698, 1995.
Carhart, M.M., “On persistence in mutual fund performance”, Journal of Finance 52,57–82, 1997.
Carlson, R. S., “Aggregate performance of mutual funds”, Journal of Financial and Quantitative Analysis 5, 1-31, 1970.
Chang, C.C., “Construction of Stock Index Simulation Portfolio Using Genetic Algorithm” M.A. thesis, Graduate Institute of Accounting, National Taipei University, Taipei, Taiwan), in Chinese, 2003.
Cheney, J.M., S. Atkinson and B.A. Bailey, “International Mutual Fund Performance U.S. vs. U.K.”,Managerial Finance. Patrington,Vol. 18, Iss. 2; pg. 39, 10 pgs,1992.
Chiu, C.R., “An Application of Genetic Algorithms on Portfolio Strategies” M.A. thesis, Graduate Institute of Economics, National Sun Yat-sen University, Kaohsiung, Taiwan), in Chinese, 1998.
Chopra, N., J. Lakonishok, and J.R. Ritter, “Measuring abnormal performance: Do stocks overreact?” Journal of Financial Economics 31, 235–268, 1992.
Daniel, K, and S. Titman, “Evidence on the characteristics of cross-sectional variation in stock returns”, Journal of Finance 52, 1–33, 1997.
Daniel, K., M. Grinblatt, S. Titman, and R. Wermers,” Measuring mutual fund performance with characteristic-based benchmarks”, Journal of Finance 52, 1035–1058, 1997.
Daniel, W. W.,” Applied Nonparametric Statistics”, Pws-Kent Publishing Company, 358-364, 1994.
Detzler, M. L., “The value of mutual fund rankings to the individual investor”, Journal of Business & Economic Studies 8, 48-72, 2002.
Droms, W. G., and D. A. Walker, “Performance persistence of international mutual funds”, Global Finance Journal 12, 237-248, 2001.
Dunn, P. C., and, R. D. Theisen, “How consistently do active managers win”, Journal of Portfolio Management 9, 47-51, 1983.
Elton, E. and Gruber, M., “Modern Portfolio Theory and Investment Analysis”. New York:　John Wiley & Sons, 1981.
Fama, E.F., and K.R. French, “Common risk factors in the returns on stocks and bonds”, Journal of Financial Economics 33, 3–56, 1993.
Fama, E.F., and K.R. French, “Multifactor explanations of asset pricing anomalies”, Journal of Finance 51, 55–84, 1996.
Geert B., C.B. Erb, C.R. Harvey, and T.E.B. Viskanta, “Distributional characteristics of emerging market returns and asset allocation.” Journal of Portfolio Management, Winter, pp. 102-116, 1998.
Goetzmann, W. N., and R. G. Ibbotson, 1994, “Do winners repeat?” Journal of Portfolio Management, 9-18.
Goldberg D.E., “Genetic Algorithms in Search, Optimization and Machine Learning.” Addison-Wesley Publishing Co., 1989.
Grinblatt, M., and S. Titman,” The persistence of mutual fund performance”, Journal of Finance 47, 1977-1984, 1992.
Grinblatt, M., and Titman, S., “Mutual fund performance: An analysis of quarterly portfolio holdings”. Journal of Business 62:393-416, 1992.
Brightman, J.S., Haslanger, B.L.. Journal of Portfolio Management. New York: Winter. Vol. 6, Iss. 2; p. 43, 1980.
Hendricks, D., J. Patel, and R. Zeckhauser, “Hot hands in mutual funds: short-run persistence of relative performance 1974-88”, Journal of Finance 48, 93-130, 1993.
Holland J., “Adaptation in Natural and Artificial System” , 1975.
Hull, J. and A. White, “The Pricing of Options on Assets with Stochastic Volatilities”The Journal of Finance. Cambridge: Jun. Vol. 42, Iss. 2; p. 281,1987

Ippolito, R. A.,” Consumer reaction to measures of poor quality: evidence from the mutual fund industry”, Journal of Law and Economics 35, 45-70, 1992.
Jensen, M. C., “The performance of mutual funds in the period 1945-1964”, Journal of Finance 23, 389-416, 1969.
Lee, S., and Chang, K.P.. “Mean-variance-instability portfolio analysis: A case of Taiwan's stock market”, Management Science. Linthicum: Jul. Vol. 41, Iss. 7; p. 1151 (7 pages) ,1995.
Leinweber, D. J. and R.D.Arnott, “Quantiative and Computational Innovation in Investment Management” Journal of Portfolio Management, pp. 8-15, 1995.
Lin P.C., “An Application of Genetic Algorithms on User-Oriented Portfolio Selection” M.A. thesis, Graduate Institute of Information Management, National Chiao Tung University, Hsinchu, Taiwan), in Chinese, 1997.
Lyon, J.D., B.M. Barber, and Chih-Ling Tsai, “Improved methods for tests of longrun abnormal stock returns”, Journal of Finance 54, 165–201, 1999.
Malkiel, B., 1995, “Returns form investing in equity mutual funds 1971 to”, Journal of Finance 50, 549-572, 1991.
Markowitz H.,1995, “Portfolio selection”. Journal of Finance 1952; pp.77-91
Moses, E.A., J. M.Cheyney, and E. T. Viet, “A new and more complete performance measure”, Journal of Portfolio Management 13, 24-33, 1987.
Praetz, P.D., “The distribution of share price changes.” Journal of Business 45,pp. 45-55.
Sharpe, W. F., 1966, “Mutual fund performance”, Journal of Business 39,119-138,1972.
Smith, K. V., and D. A. Tito, “Risk-return measures of ex-post portfolio performance”, Journal of Financial and Quantitative Analysis 4,449-471, 1969.
Treynor, J. L., “How to rate management of investment funds”, Harvard Business Review 43, 63-75, 1965.
Warshawsky, M., M. DiCarlantonio, and L. Mullan, “The persistence of morningstrar ratings”, Journal of Financial Planning, 110-128, 2000.
Williamson, P. J., “Measurement and forecasting of mutual fund performance: choosing an investment strategy”, Financial Analysts Journal 28, 78-84, 1972.