Pamr: Passive aggressive mean reversion strategy for portfolio selection. This article proposes a novel online portfolio selection strategy named “Passive Aggressive Mean Reversion” (PAMR). Unlike traditional trend following approaches, the proposed approach relies upon the mean reversion relation of financial markets. Equipped with online passive aggressive learning technique from machine learning, the proposed portfolio selection strategy can effectively exploit the mean reversion property of markets. By analyzing PAMR’s update scheme, we find that it nicely trades off between portfolio return and volatility risk and reflects the mean reversion trading principle. We also present several variants of PAMR algorithm, including a mixture algorithm which mixes PAMR and other strategies. We conduct extensive numerical experiments to evaluate the empirical performance of the proposed algorithms on various real datasets. The encouraging results show that in most cases the proposed PAMR strategy outperforms all benchmarks and almost all state-of-the-art portfolio selection strategies under various performance metrics. In addition to its superior performance, the proposed PAMR runs extremely fast and thus is very suitable for real-life online trading applications. The experimental testbed including source codes and data sets is available at http://​www.​cais.​ntu.​edu.​sg/​ chhoi/​PAMR/​.

References in zbMATH (referenced in 11 articles )

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  1. Guo, Sini; Gu, Jia-Wen; Ching, Wai-Ki: Adaptive online portfolio selection with transaction costs (2021)
  2. Ha, Youngmin; Zhang, Hai: Algorithmic trading for online portfolio selection under limited market liquidity (2020)
  3. Peng, Zijin; Xu, Weijun; Li, Hongyi: A novel online portfolio selection strategy with multiperiodical asymmetric mean reversion (2020)
  4. Yang, Xingyu; He, Jin’An; Xian, Jiayi; Lin, Hong; Zhang, Yong: Aggregating expert advice strategy for online portfolio selection with side information (2020)
  5. Schroeder, Pascal; Kacem, Imed; Schmidt, Günter: Optimal online algorithms for the portfolio selection problem, bi-directional trading and -search with interrelated prices (2019)
  6. Lai, Zhao-Rong; Yang, Pei-Yi; Fang, Liangda; Wu, Xiaotian: Short-term sparse portfolio optimization based on alternating direction method of multipliers (2018)
  7. Li, Bin; Wang, Jialei; Huang, Dingjiang; Hoi, Steven C. H.: Transaction cost optimization for online portfolio selection (2018)
  8. Li, Bin; Sahoo, Doyen; Hoi, Steven C. H.: OLPS: a toolbox for on-line portfolio selection (2016) ioport
  9. Lu, Jing; Hoi, Steven C. H.; Wang, Jialei; Zhao, Peilin; Liu, Zhi-Yong: Large scale online kernel learning (2016)
  10. Li, Bin; Hoi, Steven C. H.: Online portfolio selection: a survey (2014)
  11. Li, Bin; Zhao, Peilin; Hoi, Steven C. H.; Gopalkrishnan, Vivekanand: PAMR: passive aggressive mean reversion strategy for portfolio selection (2012)