Online portfolio selection with group sparsity

Puja Das, Nicholas Johnson, Arindam Banerjee

Research output: Chapter in Book/Report/Conference proceedingConference contribution

8 Scopus citations

Abstract

In portfolio selection, it often might be preferable to focus on a few top performing industries/sectors to beat the market. These top performing sectors however might change over time. In this paper, we propose an online portfolio selection algorithm that can take advantage of sector information through the use of a group sparsity inducing regularizer while making lazy updates to the portfolio. The lazy updates prevent changing ones portfolio too often which otherwise might incur huge transaction costs. The proposed formulation leads to a non-smooth constrained optimization problem at every step, with the constraint that the solution has to lie in a probability simplex. We propose an efficient primal-dual based alternating direction method of multipliers algorithm and demonstrate its effectiveness for the problem of online portfolio selection with sector information. We show that our algorithm OLU-GS has sub-linear regret w.r.t. the best fixed and best shifting solution in hindsight. We successfully establish the robustness and scalability of OLU-GS by performing extensive experiments on two real-world datasets.

Original languageEnglish (US)
Title of host publicationProceedings of the National Conference on Artificial Intelligence
PublisherAI Access Foundation
Pages1185-1191
Number of pages7
ISBN (Electronic)9781577356783
StatePublished - Jan 1 2014
Event28th AAAI Conference on Artificial Intelligence, AAAI 2014, 26th Innovative Applications of Artificial Intelligence Conference, IAAI 2014 and the 5th Symposium on Educational Advances in Artificial Intelligence, EAAI 2014 - Quebec City, Canada
Duration: Jul 27 2014Jul 31 2014

Publication series

NameProceedings of the National Conference on Artificial Intelligence
Volume2

Other

Other28th AAAI Conference on Artificial Intelligence, AAAI 2014, 26th Innovative Applications of Artificial Intelligence Conference, IAAI 2014 and the 5th Symposium on Educational Advances in Artificial Intelligence, EAAI 2014
CountryCanada
CityQuebec City
Period7/27/147/31/14

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