On-Line Portfolio Selection Strategy Based on Weighted Moving Average Asymmetric Mean Reversion

Zijin PENG

Abstract


Mean reversion is an important property for constructing efficient on-line portfolio selection strategy. The existing strategies mostly suppose that the mean reversion is multi-period symmetric or single-period asymmetric. However, the mean reversion is multi-period and asymmetric in the real market. Taking this into account, on-line strategies based on multi-period asymmetric mean reversion is proposed. With designing multi-piecewise loss function and imitating passive aggressive algorithm, we propose a new on-line strategy WMAAMR. This strategy runs in linear time, and thus is suitable for large-scale trading applications. Empirical results on four real markets show that WMAAMR can achieve better results and bear higher transaction cost rate.

Keywords


Mean reversion; Weighted moving average; Multi-period; Asymmetry; Passive aggressive algorithm; On-line portfolio selection strategy

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References


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DOI: http://dx.doi.org/10.3968/n

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