A set of profit-based loss functions lets time-series networks output daily long/short portfolio weights directly, and the best configuration reports 48 to 53 percent backtested annual returns on 50 S&P 500 stocks over 2021 to 2023.
Deep Reinforcement Learning Strategies in Finance: Insights into Asset Holding, Trading Behavior, and Purchase Diversity
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abstract
Recent deep reinforcement learning (DRL) methods in finance show promising outcomes. However, there is limited research examining the behavior of these DRL algorithms. This paper aims to investigate their tendencies towards holding or trading financial assets as well as purchase diversity. By analyzing their trading behaviors, we provide insights into the decision-making processes of DRL models in finance applications. Our findings reveal that each DRL algorithm exhibits unique trading patterns and strategies, with A2C emerging as the top performer in terms of cumulative rewards. While PPO and SAC engage in significant trades with a limited number of stocks, DDPG and TD3 adopt a more balanced approach. Furthermore, SAC and PPO tend to hold positions for shorter durations, whereas DDPG, A2C, and TD3 display a propensity to remain stationary for extended periods.
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Directly Learning Stock Trading Strategies Through Profit Guided Loss Functions
A set of profit-based loss functions lets time-series networks output daily long/short portfolio weights directly, and the best configuration reports 48 to 53 percent backtested annual returns on 50 S&P 500 stocks over 2021 to 2023.