A new online portfolio selection algorithm based on Kalman Filter and anti-correlation

Gang Chu, Wei Zhang, Guofeng Sun and Xiaotao Zhang

Physica A: Statistical Mechanics and its Applications, 2019, vol. 536, issue C

Abstract: In this paper, we consider both momentum and reversal in the original Anticor algorithm and propose a new online portfolio selection algorithm named the Wavelet de-noise Kalman Momentum anti-correlation algorithm (W-KACM), which can fully exploit the property of the price fluctuation. Our new strategy also employs a improved measure of the cyclically adjusted price relative called the Wavelet de-noise Kalman Filter price relative (WKFPR). WKFPR, unlike the raw price relative that measures only how much the price moves from one period to the next, measures how far the price deviates from the inherent trend value. To demonstrate the effectiveness of our strategy, we extensively simulate on previously untested real market datasets, including Chinese stock market datasets, and make comparison with AC and KACM algorithms. The results of these experiments indicate that our strategy significantly outperforms the Anticor and KACM algorithms without any additional model or computational complexity.

Keywords: Online portfolio selection; Wavelet de-noise; Kalman Filter; Anti-correlation; Mean reversion; Mean aversion (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437119305412
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:536:y:2019:i:c:s0378437119305412

DOI: 10.1016/j.physa.2019.04.185

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().