Causal Inference on Investment Constraints and Non-stationarity in Dynamic Portfolio Optimization through Reinforcement Learning

• URL: http://arxiv.org/abs/2311.04946v1
• Date: Wed, 8 Nov 2023 07:55:51 GMT
• Title: Causal Inference on Investment Constraints and Non-stationarity in Dynamic Portfolio Optimization through Reinforcement Learning
• Authors: Yasuhiro Nakayama, Tomochika Sawaki
• Abstract summary: We have developed a dynamic asset allocation investment strategy using reinforcement learning techniques. We have addressed the crucial issue of incorporating non-stationarity of financial time series data into reinforcement learning algorithms. The application of reinforcement learning in investment strategies provides a remarkable advantage of setting the optimization problem flexibly.
• Score: 0.0
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: In this study, we have developed a dynamic asset allocation investment strategy using reinforcement learning techniques. To begin with, we have addressed the crucial issue of incorporating non-stationarity of financial time series data into reinforcement learning algorithms, which is a significant implementation in the application of reinforcement learning in investment strategies. Our findings highlight the significance of introducing certain variables such as regime change in the environment setting to enhance the prediction accuracy. Furthermore, the application of reinforcement learning in investment strategies provides a remarkable advantage of setting the optimization problem flexibly. This enables the integration of practical constraints faced by investors into the algorithm, resulting in efficient optimization. Our study has categorized the investment strategy formulation conditions into three main categories, including performance measurement indicators, portfolio management rules, and other constraints. We have evaluated the impact of incorporating these conditions into the environment and rewards in a reinforcement learning framework and examined how they influence investment behavior.

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