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Can Artificial Intelligence Trade the Stock Market?

Author

Listed:
  • Jędrzej Maskiewicz

    (Quantitative Finance Research Group, Department of Quantitative Finance, Faculty of Economic Sciences, University of Warsaw)

  • Paweł Sakowski

    (Quantitative Finance Research Group, Department of Quantitative Finance, Faculty of Economic Sciences, University of Warsaw)

Abstract

The paper explores the use of Deep Reinforcement Learning (DRL) in stock market trading, focusing on two algorithms: Double Deep Q-Network (DDQN) and Proximal Policy Optimization (PPO) and compares them with Buy and Hold benchmark. It evaluates these algorithms across three currency pairs, the S&P 500 index and Bitcoin, on the daily data in the period of 2019-2023. The results demonstrate DRL's effectiveness in trading and its ability to manage risk by strategically avoiding trades in unfavorable conditions, providing a substantial edge over classical approaches, based on supervised learning in terms of risk-adjusted returns.

Suggested Citation

  • Jędrzej Maskiewicz & Paweł Sakowski, 2025. "Can Artificial Intelligence Trade the Stock Market?," Working Papers 2025-14, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2025-14
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    File URL: https://www.wne.uw.edu.pl/download_file/5608/0
    File Function: First version, 2025
    Download Restriction: no
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    More about this item

    Keywords

    Reinforcement Learning; Deep Learning; stock market; algorithmic trading; Double Deep Q-Network; Proximal Policy Optimization;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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