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Adaptive Investment Strategies For Periodic Environments

Author

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  • J.-EMETERIO NAVARRO-BARRIENTOS

    (Department of Computer Science, Humboldt-Universität zu Berlin, Unter den Linden 6, 10099 Berlin, Germany)

Abstract

In this paper, an adaptive investment strategy for environments with periodic returns on investment is presented. In this approach, an investment model is considered where the agent decides at every time step the proportion of wealth to invest in a risky asset, keeping the rest of the budget in a risk-free asset. Every investment is evaluated in the market via stylized return on investment function (RoI), which is modeled by a stochastic process with unknown periodicities and levels of noise. For comparison, two reference strategies are presented which represent the case of agents with zero knowledge and complete knowledge of the dynamics of the returns. An investment strategy based on technical analysis to forecast the next return is also considered. To account for the performance of the different strategies, some computer experiments are performed to calculate the average budget that can be obtained with them over a certain number of time steps. To assure fair comparisons, the parameters of each strategy are first tuned for budget maximization. Afterward, the performance of these strategies is compared for RoI's with different periodicities and levels of noise.

Suggested Citation

  • J.-Emeterio Navarro-Barrientos, 2008. "Adaptive Investment Strategies For Periodic Environments," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 11(05), pages 761-787.
    • Handle: RePEc:wsi:acsxxx:v:11:y:2008:i:05:n:s0219525908001933
    DOI: 10.1142/S0219525908001933
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    Cited by:

    1. J. Emeterio Navarro-Barrientos & Frank E. Walter & Frank Schweitzer, 2008. "Risk-Seeking Versus Risk-Avoiding Investments In Noisy Periodic Environments," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 19(06), pages 971-994.

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