Computer Science – Computational Engineering – Finance – and Science
Scientific paper
2007-09-27
Advances in Complex Systems Vol. 11, No. 5 (2008) 761-787
Computer Science
Computational Engineering, Finance, and Science
Paper submitted to Advances in Complex Systems (November, 2007) 22 pages, 9 figures
Scientific paper
10.1142/S0219525908001933
In this paper, we present an adaptive investment strategy for environments with periodic returns on investment. In our approach, we consider an investment model where the agent decides at every time step the proportion of wealth to invest in a risky asset, keeping the rest of the budget in a risk-free asset. Every investment is evaluated in the market via a stylized return on investment function (RoI), which is modeled by a stochastic process with unknown periodicities and levels of noise. For comparison reasons, we present two reference strategies which represent the case of agents with zero-knowledge and complete-knowledge of the dynamics of the returns. We consider also an investment strategy based on technical analysis to forecast the next return by fitting a trend line to previous received returns. To account for the performance of the different strategies, we perform some computer experiments to calculate the average budget that can be obtained with them over a certain number of time steps. To assure for fair comparisons, we first tune the parameters of each strategy. Afterwards, we compare the performance of these strategies for RoIs with different periodicities and levels of noise.
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