Abstract
Recommending stocks is very important for investment companies and investors. However, without enough analysts, no stock selection strategy can capture the dynamics of all S&P 500 stocks. Nevertheless, most existing recommending strategies are based on predictive models to buy and hold stocks with high return potential. But these strategies fail to recommend stocks from different industrial sectors to reduce risks. In this article, we propose a novel solution that recommends a stock portfolio with reinforcement learning from the S&P 500 index. Our basic idea is to construct a stock relation graph (RG) which provide rich relations among stocks and industrial sectors, to generate diversified recommendation result. To this end, we design a new method to explore high-quality stocks from the constructed relation graph with reinforcement learning. Specifically, the reinforcement learning agent jumps from each industrial sector to select stock based on the feedback signals from the market. Finally, we apply portfolio allocation methods (i.e., mean-variance and minimum-variance) to test the validity of the recommendation. The empirical results show that the performance of portfolio allocation based on the selected stocks is better than the long-term strategy on the S&P 500 Index in terms of cumulative returns.
Market sentiment-aware deep reinforcement learning approach for stock portfolio allocation