Online Portfolio Selection with ML Predictions
Ziliang Zhang, Tianming Zhao, Albert Y. Zomaya
Abstract
Online portfolio selection seeks to determine a sequence of allocations to maximize capital growth. Classical universal strategies asymptotically match the best constant-rebalanced portfolio but ignore potential forecasts, whereas heuristic methods often collapse when belief fails. We formalize this tension in a learning-augmented setting in which an investor observes (possibly erroneous) predictions prior to each decision moment, and we introduce the Rebalanced Arithmetic Mean portfolio with predictions (RAM) . Under arbitrary return sequences, we prove that RAM captures at least a constant fraction of the hindsight-optimal wealth when forecasts are perfect while still exceeding the geometric mean of the sequence even when the predictions are adversarial. Comprehensive experiments on large-scale equity data strengthen our theory, spanning both synthetic prediction streams and production-grade machine-learning models. RAM advantages over universal-portfolio variants equipped with side information across various regimes. These results demonstrate that modest predictive power can be reliably converted into tangible gains without sacrificing worst-case guarantees.
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