Neural Network Predictive Modeling on Dynamic Portfolio Management—A Simulation-Based Portfolio Optimization Approach
Bibliographic record
Abstract
Portfolio optimization and quantitative risk management have been studied extensively since the 1990s and began to attract even more attention after the 2008 financial crisis. This disastrous occurrence propelled portfolio managers to reevaluate and mitigate the risk and return trade-off in building their clients’ portfolios. The advancement of machine-learning algorithms and computing resources helps portfolio managers explore rich information by incorporating macroeconomic conditions into their investment strategies and optimizing their portfolio performance in a timely manner. In this paper, we present a simulation-based approach by fusing a number of macroeconomic factors using Neural Networks (NN) to build an Economic Factor-based Predictive Model (EFPM). Then, we combine it with the Copula-GARCH simulation model and the Mean-Conditional Value at Risk (Mean-CVaR) framework to derive an optimal portfolio comprised of six index funds. Empirical tests on the resulting portfolio are conducted on an out-of-sample dataset utilizing a rolling-horizon approach. Finally, we compare its performance against three benchmark portfolios over a period of almost twelve years (01/2007–11/2019). The results indicate that the proposed EFPM-based asset allocation strategy outperforms the three alternatives on many common metrics, including annualized return, volatility, Sharpe ratio, maximum drawdown, and 99% CVaR.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.003 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.001 | 0.001 |
| Open science | 0.001 | 0.001 |
| Research integrity | 0.001 | 0.001 |
| Insufficient payload (model declined to judge) | 0.001 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".