Deep Reinforcement Learning Agent for S&P 500 Stock Selection

Dynamic portfolio rebalancing through reinforcement learning

Portfolio managements in financial markets involve risk management strategies and opportunistic responses to individual trading behaviours. Optimal portfolios constructed aim to have a minimal risk with highest accompanying investment returns, regardless of market conditions. This paper focuses on providing an alternative view in maximising portfolio returns using Reinforcement Learning (RL) by considering dynamic risks appropriate to market conditions through dynamic portfolio rebalancing. The proposed algorithm is able to improve portfolio management by introducing the dynamic rebalancing of portfolios with vigorous risk through an RL agent. This is done while accounting for market conditions, asset diversifications, risk and returns in the global financial market. Studies have been performed in this paper to explore four types of methods with variations in fully portfolio rebalancing and gradual portfolio rebalancing, which combine with and without the use of the Long Short-Term Memory (LSTM) model to predict stock prices for adjusting the technical indicator centring. Performances of the four methods have been evaluated and compared using three constructed financial portfolios, including one portfolio with global market index assets with different risk levels, and two portfolios with uncorrelated stock assets from different sectors and risk levels. Observed from the experiment results, the proposed RL agent for gradual portfolio rebalancing with the LSTM model on price prediction outperforms the other three methods, as well as returns of individual assets in these three portfolios. The improvements of the returns using the RL agent for gradual rebalancing with prediction model are achieved at about 27.9–93.4% over those of the full rebalancing without prediction model. It has demonstrated the ability to dynamically adjust portfolio compositions according to the market trends, risks and returns of the global indices and stock assets.

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.

An Advanced Decision Making Framework via Joint Utilization of Context-Dependent Data Envelopment Analysis and Sentimental Messages

Compared to widely examined topics in the related literature, such as financial crises/difficulties in accurate prediction, studies on corporate performance forecasting are quite scarce. To fill the research gap, this study introduces an advanced decision making framework that incorporates context-dependent data envelopment analysis (CD-DEA), fuzzy robust principal component analysis (FRPCA), latent Dirichlet allocation (LDA), and stochastic gradient twin support vector machine (SGTSVM) for corporate performance forecasting. Ratio analysis with the merits of easy-to-use and intuitiveness plays an essential role in performance analysis, but it typically has one input variable and one output variable, which is unable to appropriately depict the inherent status of a corporate’s operations. To combat this, we consider CD-DEA as it can handle multiple input and multiple output variables simultaneously and yields an attainable target to analyze decision making units (DMUs) when the data present great variations. To strengthen the discriminant ability of CD-DEA, we also conduct FRPCA, and because numerical messages based on historical principles normally cannot transmit future corporate messages, we execute LDA to decompose the accounting narratives into many topics and preserve those topics that are relevant to corporate operations. Sequentially, the process matches the preserved topics with a sentimental dictionary to exploit the hidden sentiments in each topic. The analyzed data are then fed into SGTSVM to construct the forecasting model. The result herein reveals that the introduced decision making framework is a promising alternative for performance forecasting.

Identification of the Critical Factors for Global Supply Chain Management under the COVID-19 Outbreak via a Fusion Intelligent Decision Support System

Under the ravages of COVID-19, global supply chains have encountered unprecedented disruptions. Past experiences cannot fully explain the situations nor provide any suitable responses to these fatal shocks on supply chain management (SCM), especially in todays’ highly intertwined/globalized business environment. This research thus revisits and rechecks the crucial components for global SCM during such special periods, and the basic essence of such management covers numerous perspectives that can be categorized into a multiple criteria decision making (MCDM) approach. To handle this complex issue appropriately, one can introduce a fusion intelligent system that involves data envelopment analysis (DEA), rough set theory (RST), and MCDM to understand the reality of the analyzed problem in a faster and better manner. Based on the empirical results, we rank the priorities in order as cash management and information (D), raw material supply (B), global management strategy (C), and productivity and logistics (A) for improvement in SCM. This finding is confirmed by companies now undergoing a downsizing strategy in order to survive in this harsh business environment.