IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2608.10410.html

Objective-oriented quantitative investment: A specification-driven framework for automated synthesis of trading strategy pipelines

Author

Listed:
  • Liangliang Zhang

Abstract

Automated quantitative research has made striking progress, yet each system answers the same question: which strategy scores highest on a scalar metric? We argue this question is incomplete. Professional investors do not order "the highest return"; they order an identity--pure stock-selection alpha uncontaminated by style exposure, resilient in unilateral market declines, within turnover and capacity budgets. We call the incumbent paradigm result-oriented and propose Objective-Oriented Quantitative Investment (OOQI): a specification-driven framework in which (i) the full strategy pipeline is modeled as a typed design space of interchangeable modules with explicit interface contracts (8.85 x 10^8 assemblies in our reference instantiation); (ii) investor intent is formalized as a strategy profile specification--a composable language of measurable, falsifiable clauses from eight requirement families, with hard/soft semantics and an interaction algebra; and (iii) a compiler translates specifications into constrained assemblies and verifies satisfaction clause-by-clause. Because search over large assembly spaces inflates apparent satisfaction, we develop a verification protocol treating the satisfaction rate itself as a statistical object, subject to deflation for search width, temporal holdout, and random-assembly null models. A synthetic demonstration with 32 pipeline assemblies shows that result-oriented selection attains the top in-sample information ratio while satisfying only 25% of the specification, whereas specification-driven selection satisfies 100% of it at a 5.5% score cost. The accompanying theory shows satisfaction-driven synthesis is NP-hard in general yet constant-factor approximable in a conflict-free regime; specifications form a lattice dual to assemblies; each clause carries a Lagrangian shadow price; and rolling re-certification is anytime-valid via e-processes.

Suggested Citation

  • Liangliang Zhang, 2026. "Objective-oriented quantitative investment: A specification-driven framework for automated synthesis of trading strategy pipelines," Papers 2608.10410, arXiv.org.
  • Handle: RePEc:arx:papers:2608.10410
    as

    Download full text from publisher

    File URL: https://arxiv.org/pdf/2608.10410
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
    2. Wentao Zhang & Lingxuan Zhao & Haochong Xia & Shuo Sun & Jiaze Sun & Molei Qin & Xinyi Li & Yuqing Zhao & Yilei Zhao & Xinyu Cai & Longtao Zheng & Xinrun Wang & Bo An, 2024. "A Multimodal Foundation Agent for Financial Trading: Tool-Augmented, Diversified, and Generalist," Papers 2402.18485, arXiv.org, revised Jun 2024.
    3. Andrew Ang & Geert Bekaert, 2002. "International Asset Allocation With Regime Shifts," The Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1137-1187.
    4. Fuli Feng & Xiangnan He & Xiang Wang & Cheng Luo & Yiqun Liu & Tat-Seng Chua, 2018. "Temporal Relational Ranking for Stock Prediction," Papers 1809.09441, arXiv.org, revised Jan 2019.
    5. Robert Novy-Marx & Mihail Velikov, 2016. "A Taxonomy of Anomalies and Their Trading Costs," The Review of Financial Studies, Society for Financial Studies, vol. 29(1), pages 104-147.
    6. Nicolae Gârleanu & Lasse Heje Pedersen, 2013. "Dynamic Trading with Predictable Returns and Transaction Costs," Journal of Finance, American Finance Association, vol. 68(6), pages 2309-2340, December.
    7. Hansen, Peter Reinhard, 2005. "A Test for Superior Predictive Ability," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 365-380, October.
    8. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    9. Shuo Yu & Hongyan Xue & Xiang Ao & Feiyang Pan & Jia He & Dandan Tu & Qing He, 2023. "Generating Synergistic Formulaic Alpha Collections via Reinforcement Learning," Papers 2306.12964, arXiv.org.
    10. Woo Chang Kim & Do-Gyun Kwon & Yongjae Lee & Jang Ho Kim & Changle Lin, 2020. "Personalized goal-based investing via multi-stage stochastic goal programming," Quantitative Finance, Taylor & Francis Journals, vol. 20(3), pages 515-526, March.
    11. David Manheim & Scott Garrabrant, 2018. "Categorizing Variants of Goodhart's Law," Papers 1803.04585, arXiv.org, revised Feb 2019.
    12. Philippe Jorion, 2003. "Portfolio Optimization with Tracking-Error Constraints," Financial Analysts Journal, Taylor & Francis Journals, vol. 59(5), pages 70-82, September.
    13. Haochen Luo & Zhengzhao Lai & Junjie Xu & Yifan Li & Tang Pok Hin & Yuan Zhang & Chen Liu, 2026. "From Natural Language to Executable Option Strategies via Large Language Models," Papers 2603.16434, arXiv.org.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Sicong & DeMiguel, Victor & Martín-Utrera, Alberto, 2024. "Comparing factor models with price-impact costs," Journal of Financial Economics, Elsevier, vol. 162(C).
    2. Li, Haitao & Wu, Chongfeng & Zhou, Chunyang, 2026. "Machine+Heuristics: Nonlinear parametric portfolio policies with economic restrictions," Journal of Financial Markets, Elsevier, vol. 79(C).
    3. Dahlquist, Magnus & Odegaard, Bernt Arne, 2018. "A Review of Norges Bank's Active Management of the Government Pension Fund Global," UiS Working Papers in Economics and Finance 2018/1, University of Stavanger.
    4. Bollerslev, Tim & Patton, Andrew J. & Quaedvlieg, Rogier, 2022. "Realized semibetas: Disentangling “good” and “bad” downside risks," Journal of Financial Economics, Elsevier, vol. 144(1), pages 227-246.
    5. Stephen A. Gorman & Frank J. Fabozzi, 2021. "The ABC’s of the alternative risk premium: academic roots," Journal of Asset Management, Palgrave Macmillan, vol. 22(6), pages 405-436, October.
    6. Chuan-Hao Hsu & Hung-Gay Fung & Yi-Ping Chang, 2016. "The performance of Taiwanese firms after a share repurchase announcement," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 1251-1269, November.
    7. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    8. Alessia Naccarato & Andrea Pierini & Giovanna Ferraro, 2021. "Markowitz portfolio optimization through pairs trading cointegrated strategy in long-term investment," Annals of Operations Research, Springer, vol. 299(1), pages 81-99, April.
    9. Cakici, Nusret & Zaremba, Adam, 2022. "Salience theory and the cross-section of stock returns: International and further evidence," Journal of Financial Economics, Elsevier, vol. 146(2), pages 689-725.
    10. Arısoy, Yakup Eser & Altay-Salih, Aslıhan & Akdeniz, Levent, 2015. "Aggregate volatility expectations and threshold CAPM," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 231-253.
    11. Mohrschladt, Hannes, 2021. "The ordering of historical returns and the cross-section of subsequent returns," Journal of Banking & Finance, Elsevier, vol. 125(C).
    12. Malakhov, Alexey & Riley, Timothy B. & Yan, Qing, 2024. "Do hedge funds bet against beta?," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 1507-1525.
    13. Ledoit, Olivier & Wolf, Michael, 2025. "Markowitz portfolios under transaction costs," The Quarterly Review of Economics and Finance, Elsevier, vol. 100(C).
    14. Pätäri, Eero & Karell, Ville & Luukka, Pasi & Yeomans, Julian S, 2018. "Comparison of the multicriteria decision-making methods for equity portfolio selection: The U.S. evidence," European Journal of Operational Research, Elsevier, vol. 265(2), pages 655-672.
    15. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, January.
    16. Ammann, Manuel & Coqueret, Guillaume & Schade, Jan-Philip, 2016. "Characteristics-based portfolio choice with leverage constraints," Journal of Banking & Finance, Elsevier, vol. 70(C), pages 23-37.
    17. Kozak, Serhiy & Nagel, Stefan & Santosh, Shrihari, 2020. "Shrinking the cross-section," Journal of Financial Economics, Elsevier, vol. 135(2), pages 271-292.
    18. Geertsema, Paul & Lu, Helen, 2020. "The correlation structure of anomaly strategies," Journal of Banking & Finance, Elsevier, vol. 119(C).
    19. Timotheos Angelidis & Nikolaos Tessaromatis, 2014. "Global portfolio management under state dependent multiple risk premia," Proceedings of Economics and Finance Conferences 0400966, International Institute of Social and Economic Sciences.
    20. Peixin (Payton) Liu & Kuan Xu & Yonggan Zhao, 2011. "Market regimes, sectorial investments, and time‐varying risk premiums," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 7(2), pages 107-133, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2608.10410. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: https://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.