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Intelligent Trading Systems: A Sentiment-Aware Reinforcement Learning Approach

Author

Listed:
  • Francisco Caio Lima Paiva
  • Leonardo Kanashiro Felizardo
  • Reinaldo Augusto da Costa Bianchi
  • Anna Helena Reali Costa

Abstract

The feasibility of making profitable trades on a single asset on stock exchanges based on patterns identification has long attracted researchers. Reinforcement Learning (RL) and Natural Language Processing have gained notoriety in these single-asset trading tasks, but only a few works have explored their combination. Moreover, some issues are still not addressed, such as extracting market sentiment momentum through the explicit capture of sentiment features that reflect the market condition over time and assessing the consistency and stability of RL results in different situations. Filling this gap, we propose the Sentiment-Aware RL (SentARL) intelligent trading system that improves profit stability by leveraging market mood through an adaptive amount of past sentiment features drawn from textual news. We evaluated SentARL across twenty assets, two transaction costs, and five different periods and initializations to show its consistent effectiveness against baselines. Subsequently, this thorough assessment allowed us to identify the boundary between news coverage and market sentiment regarding the correlation of price-time series above which SentARL's effectiveness is outstanding.

Suggested Citation

  • Francisco Caio Lima Paiva & Leonardo Kanashiro Felizardo & Reinaldo Augusto da Costa Bianchi & Anna Helena Reali Costa, 2021. "Intelligent Trading Systems: A Sentiment-Aware Reinforcement Learning Approach," Papers 2112.02095, arXiv.org.
  • Handle: RePEc:arx:papers:2112.02095
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    References listed on IDEAS

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    1. John Moody & Lizhong Wu, "undated". "Optimization of Trading Systems and Portfolios," Computing in Economics and Finance 1997 55, Society for Computational Economics.
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    3. Paul Glasserman & Kriste Krstovski & Paul Laliberte & Harry Mamaysky, 2020. "Choosing News Topics to Explain Stock Market Returns," Papers 2010.07289, arXiv.org.
    4. Volodymyr Mnih & Koray Kavukcuoglu & David Silver & Andrei A. Rusu & Joel Veness & Marc G. Bellemare & Alex Graves & Martin Riedmiller & Andreas K. Fidjeland & Georg Ostrovski & Stig Petersen & Charle, 2015. "Human-level control through deep reinforcement learning," Nature, Nature, vol. 518(7540), pages 529-533, February.
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