Application of Ensemble Learning for views generation in Meucci portfolio optimization framework

Alexander Didenko () and Demicheva Svetlana
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Demicheva Svetlana: Financial University, Moscow

Review of Business and Economics Studies, 2013, issue 1, 100-110

Abstract: Modern Portfolio Theory assumes that decisions are made by individual agents. In reality most investors are involved in group decision-making. In this research we propose to realize group decision-making process by application of Ensemble Learning algorithm, in particular Random Forest. Predicting accurate asset returns is very important in the process of asset allocation. Most models are based on weak predictors. Ensemble Learning algorithms could significantly improve prediction of weak learners by combining them into one model, whichwill have superiority in performance. We combine technical fundamental and sentiment analysis in order to generate views on different asset classes. Purpose of the research is to build the model for Meucci Portfolio Optimization under views generated by Random Forest Ensemble Learning algorithm. The model was backtested by comparing with results obtained from other portfolio optimization frameworks.

Date: 2013
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Working Paper: Application of Ensemble Learning for Views Generation in Meucci Portfolio Optimization Framework (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:scn:031730:14453089

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