A Selective Portfolio Management Algorithm with Off-Policy Reinforcement Learning Using Dirichlet Distributionopen access
- Authors
- Yang, Hyunjun; Park, Hyeonjun; Lee, Kyungjae
- Issue Date
- Dec-2022
- Publisher
- MDPI
- Keywords
- deep reinforcement learning; exploration methods; portfolio optimization
- Citation
- AXIOMS, v.11, no.12
- Journal Title
- AXIOMS
- Volume
- 11
- Number
- 12
- URI
- https://scholarworks.bwise.kr/cau/handle/2019.sw.cau/61125
- DOI
- 10.3390/axioms11120664
- ISSN
- 2075-1680
2075-1680
- Abstract
- Existing methods in portfolio management deterministically produce an optimal portfolio. However, according to modern portfolio theory, there exists a trade-off between a portfolio's expected returns and risks. Therefore, the optimal portfolio does not exist definitively, but several exist, and using only one deterministic portfolio is disadvantageous for risk management. We proposed Dirichlet Distribution Trader (DDT), an algorithm that calculates multiple optimal portfolios by taking Dirichlet Distribution as a policy. The DDT algorithm makes several optimal portfolios according to risk levels. In addition, by obtaining the pi value from the distribution and applying importance sampling to off-policy learning, the sample is used efficiently. Furthermore, the architecture of our model is scalable because the feed-forward of information between portfolio stocks occurs independently. This means that even if untrained stocks are added to the portfolio, the optimal weight can be adjusted. We also conducted three experiments. In the scalability experiment, it was shown that the DDT extended model, which is trained with only three stocks, had little difference in performance from the DDT model that learned all the stocks in the portfolio. In an experiment comparing the off-policy algorithm and the on-policy algorithm, it was shown that the off-policy algorithm had good performance regardless of the stock price trend. In an experiment comparing investment results according to risk level, it was shown that a higher return or a better Sharpe ratio could be obtained through risk control.
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Collections - College of Software > Department of Artificial Intelligence > 1. Journal Articles
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