Finance and Financial Management Commons^™

Confidence Weighted Mean Reversion Strategy For On-Line Portfolio Selection, Bin Li, Steven C. H. Hoi, Peilin Zhao, Vivek Gopalkrishnan

Research Collection School Of Computing and Information Systems

On-line portfolio selection has been attracting increasing attention from the data mining and machine learning communities. All existing on-line portfolio selection strategies focus on the first order information of a portfolio vector, though the second order information may also be beneficial to a strategy. Moreover, empirical evidences show that the stock price relatives may follow the mean reversion property, which has not been fully exploited by existing strategies. This article proposes a novel on-line portfolio selection strategy named ``Confidence Weighted Mean Reversion'' (CWMR). Inspired by the mean reversion principle in finance and confidence weighted online learning technique in machine learning, …