Fractal Portfolio Optimization in the Evolving Returns Integrated System—ERIS

This paper proposes a new model with the goal of improving several aspects of the modern portfolio theory: (i) investor behavior, (ii) depiction of behavior in the fractal stochastic differential equations about price efficiency in chaotic dynamics (Tsallis statistics) and the fractal market hypothesis, (iii) the introduction of the novel Evolving Returns Integrated System (ERIS) in portfolio selection in the fractal behavioral convolution, and (iv) the selection of an accurate classifier (ERIS) among three neuro-genetic hybrids of 66 models: 22 modular, 22 Jordan–Elman and 22 generalized feedforward networks. Our model demonstrates superior classification performance across the Greek (1996–1998) and NYSE (2008–2010) equity market datasets examined in this study.