Portfolio management system in equity market neutral using reinforcement learning

Enhancing portfolio management using artificial intelligence: literature review

Building an investment portfolio is a problem that numerous researchers have addressed for many years. The key goal has always been to balance risk and reward by optimally allocating assets such as stocks, bonds, and cash. In general, the portfolio management process is based on three steps: planning, execution, and feedback, each of which has its objectives and methods to be employed. Starting from Markowitz's mean-variance portfolio theory, different frameworks have been widely accepted, which considerably renewed how asset allocation is being solved. Recent advances in artificial intelligence provide methodological and technological capabilities to solve highly complex problems, and investment portfolio is no exception. For this reason, the paper reviews the current state-of-the-art approaches by answering the core question of how artificial intelligence is transforming portfolio management steps. Moreover, as the use of artificial intelligence in finance is challenged by transparency, fairness and explainability requirements, the case study of post-hoc explanations for asset allocation is demonstrated. Finally, we discuss recent regulatory developments in the European investment business and highlight specific aspects of this business where explainable artificial intelligence could advance transparency of the investment process.

Dynamic stock-decision ensemble strategy based on deep reinforcement learning

In a complex and changeable stock market, it is very important to design a trading agent that can benefit investors. In this paper, we propose two stock trading decision-making methods. First, we propose a nested reinforcement learning (Nested RL) method based on three deep reinforcement learning models (the Advantage Actor Critic, Deep Deterministic Policy Gradient, and Soft Actor Critic models) that adopts an integration strategy by nesting reinforcement learning on the basic decision-maker. Thus, this strategy can dynamically select agents according to the current situation to generate trading decisions made under different market environments. Second, to inherit the advantages of three basic decision-makers, we consider confidence and propose a weight random selection with confidence (WRSC) strategy. In this way, investors can gain more profits by integrating the advantages of all agents. All the algorithms are validated for the U.S., Japanese and British stocks and evaluated by different performance indicators. The experimental results show that the annualized return, cumulative return, and Sharpe ratio values of our ensemble strategy are higher than those of the baselines, which indicates that our nested RL and WRSC methods can assist investors in their portfolio management with more profits under the same level of investment risk.

Data Mining Method of Intelligent Market Management Based on Collaborative Recommendation Algorithm

In order to solve the problems of low coverage and accuracy and large mean absolute error and root mean square error when traditional algorithms recommend market management data, this paper proposes an intelligent market management data mining method based on a collaborative recommendation algorithm. According to the preference value of the attribute characteristics of market management data, predict and score the attribute characteristics of market management data; use data mining technology to preprocess the information of market management data, combined with the design of collaborative filtering recommendation algorithm; and realize the collaborative filtering recommendation of market management data. With 50 recommendations, AGCAN improves the accuracy of MovieLens-1M by 43.81%, 5.43%, 1.87%, 0.42%, and 1.67%, respectively, compared with the five benchmark algorithms. For MovieLens-100K, compared with the five benchmark algorithms, AGCAN improves the accuracy by 51.17%, 10.52%, 3.37%, 0.1%, and 0.30%, respectively. Compared with the five benchmark algorithms, Amazon-baby and AGCAN have improved the accuracy by 34.37%, 28.12%, 31.25%, 29.1%, and 3.12%, respectively. The algorithm proposed in this paper uses a graph neural network to mine useful information between users and projects, but it lacks the use of other personalized interest information of users, such as user interest, user purchase time, and so on.

Deep Reinforcement Learning for Trading—A Critical Survey

Deep reinforcement learning (DRL) has achieved significant results in many machine learning (ML) benchmarks. In this short survey, we provide an overview of DRL applied to trading on financial markets with the purpose of unravelling common structures used in the trading community using DRL, as well as discovering common issues and limitations of such approaches. We include also a short corpus summarization using Google Scholar. Moreover, we discuss how one can use hierarchy for dividing the problem space, as well as using model-based RL to learn a world model of the trading environment which can be used for prediction. In addition, multiple risk measures are defined and discussed, which not only provide a way of quantifying the performance of various algorithms, but they can also act as (dense) reward-shaping mechanisms for the agent. We discuss in detail the various state representations used for financial markets, which we consider critical for the success and efficiency of such DRL agents. The market in focus for this survey is the cryptocurrency market; the results of this survey are two-fold: firstly, to find the most promising directions for further research and secondly, to show how a lack of consistency in the community can significantly impede research and the development of DRL agents for trading.