Three decision making levels in portfolio management

Abstract

To improve portfolio management process we suggest using profit histories of automated trading strategies instead of actual assets. Such history can be generated by simulating hundreds of automated trading strategies (robots). We developed three-level decision making system aimed to find the portfolio weights. At the first level, virtual robots trade the assets, at the second level we create virtual profit fusion agents that calculate weighted sums of the profit series created by the first level robots. At the third level, we rank the fusion agents, select a set of the best ones and construct the final portfolio. Experiments with real financial 2004–2011 years data confirm usefulness of the novel approach.