Reinforcement Learning techniques have shown a great potential in the active allocation of stock portfolios. However, state-of-the-art solutions show limited stability and fairly high sensitivity to volatile market conditions. To tackle these issues, this paper presents a new risk-aware approach based on Deep Q-learning Networks. It leverages Quantile Regression DQNs to mitigate the underlying market risks and an action branching architecture to effectively handle high-dimensional stock spaces. Furthermore, it also introduces noise perturbations to the network’s weights aimed at self-tuning the degree of exploration for each input dimension. Based on the empirical simulations, which were carried out on the Dow Jones-30 stocks over a three-year period, the proposed system performs better than state-of-the-art RL solutions in terms of cumulative return, stability, and sharpe ratio.

A risk-aware approach to stock portfolio allocation based on Deep Q-Networks / Fior, Jacopo; Cagliero, Luca. - (2022). (Intervento presentato al convegno International Conference on Application of Information and Communication Technologies (AICT) tenutosi a Washington DC (USA) nel 12-14 October 2022) [10.1109/AICT55583.2022.10013578].

A risk-aware approach to stock portfolio allocation based on Deep Q-Networks

Jacopo Fior;Luca Cagliero
2022

Abstract

Reinforcement Learning techniques have shown a great potential in the active allocation of stock portfolios. However, state-of-the-art solutions show limited stability and fairly high sensitivity to volatile market conditions. To tackle these issues, this paper presents a new risk-aware approach based on Deep Q-learning Networks. It leverages Quantile Regression DQNs to mitigate the underlying market risks and an action branching architecture to effectively handle high-dimensional stock spaces. Furthermore, it also introduces noise perturbations to the network’s weights aimed at self-tuning the degree of exploration for each input dimension. Based on the empirical simulations, which were carried out on the Dow Jones-30 stocks over a three-year period, the proposed system performs better than state-of-the-art RL solutions in terms of cumulative return, stability, and sharpe ratio.
2022
978-1-6654-5162-8
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11583/2971269