Optimistic Bull or Pessimistic Bear: Adaptive Deep Reinforcement Learning for Stock Portfolio Allocation

Xinyi Li, Yinchuan Li, Yuancheng Zhan and Xiao-Yang Liu

Papers from arXiv.org

Abstract: Portfolio allocation is crucial for investment companies. However, getting the best strategy in a complex and dynamic stock market is challenging. In this paper, we propose a novel Adaptive Deep Deterministic Reinforcement Learning scheme (Adaptive DDPG) for the portfolio allocation task, which incorporates optimistic or pessimistic deep reinforcement learning that is reflected in the influence from prediction errors. Dow Jones 30 component stocks are selected as our trading stocks and their daily prices are used as the training and testing data. We train the Adaptive DDPG agent and obtain a trading strategy. The Adaptive DDPG's performance is compared with the vanilla DDPG, Dow Jones Industrial Average index and the traditional min-variance and mean-variance portfolio allocation strategies. Adaptive DDPG outperforms the baselines in terms of the investment return and the Sharpe ratio.

Date: 2019-06
New Economics Papers: this item is included in nep-big, nep-cmp and nep-fmk
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1907.01503

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