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Will CONG (Cornell University) “AlphaPortfolio and Interpretable AI for Finance”

March 5, 11:00 am - 12:00 pm

FINANCIAL ECONOMETRICS SEMINAR

Time:11:00
Date: 5th of March 2020
Place: Room 3001

Will CONG (Cornell University) “AlphaPortfolio and Interpretable AI for Finance”

Abstract :We propose a reinforcement-learning-based portfolio management model, an alternative that improves upon the traditional two-step portfolio-construction paradigm a la Markowitz (1952), to directly optimize investors’ objectives under dynamic constraints. We enhance cutting-edge neural networks such as Transformer with a novel cross-asset attention mechanism to effectively capture the high-dimensional, non-linear, noisy, non-sparse, and dynamic nature of economic data and market environment. The resulting AlphaPortfolio yields stellar out-of-sample performances even after imposing various economic and trading restrictions. Importantly, using “economic distillation” combining polynomial-feature-sensitivity and textual-factor analyses, we project the black-box model onto linear regression and natural language spaces for greater transparency and interpretation. Our distilled model mimics AlphaPorfolio’s behavior and reveals key firm characteristics and their rotation and non-linearity that drive performance. Overall, we highlight the utility of reinforcement deep learning and provide a general procedure for interpreting AI and big data analytics in finance, economics, and other social sciences.

 

Organizers:
Jean-Michel ZAKOIAN (CREST )

Sponsors:
CREST and ILB

Location:
Address
 : ENSAE ParisTech
5, avenue Henry Le Chatelier
91120 Palaiseau
How to come?

 

Details

Date:
March 5
Time:
11:00 am - 12:00 pm
Event Categories:
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