Deep reinforcement learning for investing: A quantamental approach for portfolio management

The world of investments affects us all. The way surplus capital is allocated by ourselves or investment funds can determine how we eat, innovate and even educate kids. Portfolio management is an integral albeit challenging process in this task (Leković, 2021). It entails managing a basket of financial assets to maximize the returns per unit of risk, considering all the micro and macro economical, societal, political and environmental complex causal relations. This study aims to evaluate how a machine learning technique called deep reinforcement learning (DRL) can improve the activity of portfolio management. It also has a second goal of understanding if financial fundamental features (i.e., revenue, debt, assets, cash flow) improve the model performance. After conducting a literature review to establish the current state-of-the-art, the CRISP-DM method was followed: 1) Business understanding; 2) Data understanding; 3) Data preparation – two datasets were prepared, one with market only features (i.e., close price, daily volume traded) and another with market plus fundamental features; 4) Modeling – Advantage Actor-Critic (A2C), Deep Deterministic Policy Gradient (DDPG) and Twin-delayed DDPG (TD3) DRL models were optimized on both datasets; 5) Evaluation. On average, models had the same sharpe ratio performance in both datasets – average sharpe ratio of 0.35 vs 0.30 for the baseline, in the test set. DRL models outperformed traditional portfolio optimization techniques and financial fundamental features improved model robustness and consistency. Hence, supporting the use of both DRL models and quantamental investment strategies in portfolio management.Todos somos afetados pelo mundo dos investimentos. A forma como o excedente de capital é alocado tanto por nós como por fundos de investimentos determina a forma como comemos, inovamos e até mesmo como fornecemos educação às crianças. Gestão de portfólio é uma tarefa essencial e desafiadora neste processo (Leković, 2021). Envolve gerir um conjunto de ativos financeiros com o objetivo de maximizar os retornos por unidade de risco, tendo em consideração todas as relações complexas entre fatores macro e microeconómicos, sociais, políticos e ambientais. Este estudo pretende avaliar de que forma a técnica de machine learning intitulada de Aprendizagem por Reforço Profunda (ARP) consegue melhorar a tarefa de gestão de portfólios. Também tem um segundo objetivo de entender se variáveis relacionadas com a performance financeira de uma empresa (i.e., vendas, passivos, ativos, fluxos de caixa) melhoram a performance do modelo. Após o estado-de-arte ter sido definido com a revisão de literatura, utilizou-se o método CRISP-DM da seguinte forma: 1) Entendimento do negócio; 2) Entendimento dos dados; 3) Preparação dos dados – dois conjuntos de dados foram preparados, um apenas com variáveis de mercado (i.e., preço de fecho, volume transacionado) e o outro com variáveis de mercado mais variáveis de performance financeira; 4) Modelagem – usou-se os modelos Advantage Actor-Critic (A2C), Deep Deterministic Policy Gradient (DDPG) e Twin-delayed DDPG (TD3) em ambos os conjuntos de dados; 5) Avaliação. Em média, os modelos apresentaram o mesmo índice sharpe nos dois conjuntos de dados – média de 0.35 vs 0.30 para o modelo base, no conjunto de teste. Os modelos ARP apresentaram uma melhor performance do que os modelos tradicionais de otimização de portfólios e a utilização de variáveis de performance financeira melhoraram a robustez e consistência dos modelos. Tais conclusões suportam o uso de modelos ARP e de estratégias de investimentos quantamentais na gestão de portfólios

Interpreting Business Strategy and Market Dynamics: A Multi-Method AI Approach

This research paper presents an integrated approach that combines Long Short-Term Memory (LSTM), Q-Learning, Monte Carlo methods, and Text-to-Text Transfer Transformer (T5) to analyze and evaluate the business strategies of public companies. Leveraging a large and diverse dataset sourced from multiple reliable sources, the study examines corporate strategies and their impact on market dynamics. LSTM and Q-Learning are employed to process sequential data, enabling informed decision-making in simulated market environments and providing insights into potential outcomes of different strategies. The Monte Carlo method manages uncertainty, allowing for a comprehensive analysis of risks and rewards associated with specific strategies. T5 interprets textual data from earnings calls, press releases, and industry reports, offering a deeper understanding of strategic changes and market sentiments. The integration of these techniques enhances the evaluation of business strategies, enabling decision-makers to anticipate future market scenarios and make informed strategic shifts. Overall, this integrated approach provides a comprehensive framework for evaluating and anticipating market dynamics, enhancing the assessment and adjustment of public companies\u27 business decisions

Deep Learning for the Prediction of Stock Market Trends

In this study, deep learning will be used to test the predictability of stock trends. Stock markets are known to be volatile, prices fluctuate, and there are many complicated financial indicators involved. Various data including news or financial indicators can be used to predict stock prices. In this study, the focus will be on using past stock prices and using technical indicators to increase the performance of the results. The goal of this study is to measure the accuracy of predictions and evaluate the results. Historical data is gathered for Apple, Microsoft, Google and Intel stocks. A prediction model is created by using past data and technical indicators were used as features in the model. The experiments were performed by using long short-term memory networks. Different approaches and techniques were tested to boost the performance of the results. To prove the usability of the final model in the real world and measure the profitability of results backtesting was performed. The final results show that while it is not possible to predict the exact price of a stock in the future to gain profitable results, deep learning can be used to predict the trend of stock markets to generate buy and sell signals

A Deep Prediction Network for Understanding Advertiser Intent and Satisfaction

For e-commerce platforms such as Taobao and Amazon, advertisers play an important role in the entire digital ecosystem: their behaviors explicitly influence users' browsing and shopping experience; more importantly, advertiser's expenditure on advertising constitutes a primary source of platform revenue. Therefore, providing better services for advertisers is essential for the long-term prosperity for e-commerce platforms. To achieve this goal, the ad platform needs to have an in-depth understanding of advertisers in terms of both their marketing intents and satisfaction over the advertising performance, based on which further optimization could be carried out to service the advertisers in the correct direction. In this paper, we propose a novel Deep Satisfaction Prediction Network (DSPN), which models advertiser intent and satisfaction simultaneously. It employs a two-stage network structure where advertiser intent vector and satisfaction are jointly learned by considering the features of advertiser's action information and advertising performance indicators. Experiments on an Alibaba advertisement dataset and online evaluations show that our proposed DSPN outperforms state-of-the-art baselines and has stable performance in terms of AUC in the online environment. Further analyses show that DSPN not only predicts advertisers' satisfaction accurately but also learns an explainable advertiser intent, revealing the opportunities to optimize the advertising performance further

Stacked LSTM-GRU Long-Term Forecasting Model for Indonesian Islamic Banks

The development of the Islamic banking industry in Indonesia has become a significant concern in recent years, with rapid growth in the number of banks operating based on Sharia principles. To face emerging challenges and opportunities, a deep understanding of the long-term financial behavior of Islamic banks is becoming increasingly important. This study aims to predict the share price of PT Bank Syariah Indonesia Tbk, over 28 days using the LSTM-GRU stack. The observation stage includes importing the dataset, data separation, model variations, the training process, output, and evaluation. Observations were conducted using 10 model variations from 4 stacks of LSTM and GRU. Each model performs the training process in four epochs (200, 500, 750, and 1000). The results of observations in this study show that long-term predictions (28 days ahead) using four stacks of LSTM-GRU and daily training accumulation techniques produce better accuracy than the general method (using multiple outputs). From the observations we have made for predictions for the next 28 days, the model with the LGLG stack arrangement (LSTM-GRU-LSTM-GRU) produces the best accuracy at epoch 750 with an MSE LSTM-GRU 63.43762863. This study will undoubtedly continue in order to achieve even better precision, either by utilizing a new design or by further improving the technology we are now employing

Using Deep Learning for Predicting Stock Trends

Deep learning has shown great promise in solving complicated problems in recent years. One applicable area is finance. In this study, deep learning will be used to test the predictability of stock trends. Stock markets are known to be volatile, prices fluctuate, and there are many complicated financial indicators involved. While the opinion of researchers differ about the predictability of stocks, it has been shown by previous empirical studies that some aspects of stock markets can be predictable to some extent. Various data including news or financial indicators can be used to predict stock prices. In this study, the focus will be on using past stock prices and using technical indicators to increase the performance of the results. The goal of this study is to measure the accuracy of predictions and evaluate the results. Historical data is gathered for Apple, Microsoft, Google and Intel stocks. A prediction model is created by using past data and technical indicators were used as features in the model. The experiments were performed by using long short-term memory networks. Different approaches and techniques were tested to boost the performance of the results. To prove the usability of the final model in the real world and measure the profitability of results backtesting was performed. The final results show that while it is not possible to predict the exact price of a stock in the future to gain profitable results, deep learning can be used to predict the trend of stock markets to generate buy and sell signals