Multi-period portfolio selection using kernel-based control policy with dimensionality reduction

Authors:
Yuichi Takano;Jun-Ya Gotoh
Affiliations:
-;-
Venue:
Expert Systems with Applications: An International Journal
Year:
2014

Citing 6
Cited 0

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Abstract

This paper studies a nonlinear control policy for multi-period investment. The nonlinear strategy we implement is categorized as a kernel method, but solving large-scale instances of the resulting optimization problem in a direct manner is computationally intractable in the literature. In order to overcome this difficulty, we employ a dimensionality reduction technique which is often used in principal component analysis. Numerical experiments show that our strategy works not only to reduce the computation time, but also to improve out-of-sample investment performance.