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41st Annual Symposium on Foundations of Computer Science
Efficient algorithms for universal portfolios
Redondo Beach, California
November 12-November 14
ISBN: 0-7695-0850-2
A constant rebalanced portfolio is an investment strategy which keeps the same distribution of wealth among a set of stocks from day to day. There has been much work on Cover's Universal algorithm, which is competitive with the best constant rebalanced portfolio determined in hindsight (D. Helmbold et al., 1995; A. Blum and A. Kalai, 1999; T.M. Cover and E. Ordentlich, 1996). While this algorithm has good performance guarantees, all known implementations are exponential in the number of stocks, restricting the number of stocks used in experiments. We present an efficient implementation of the Universal algorithm that is based on non-uniform random walks that are rapidly mixing (D. Applegate and R. Kannanm, 1991). This same implementation also works for non-financial applications of the Universal algorithm, such as data compression (T.M. Cover, 1886) and language modeling (A. Kalai et al., 1999).
Index Terms:
stock markets; competitive algorithms; investment; data compression; universal portfolios; constant rebalanced portfolio; investment strategy; wealth; best constant rebalanced portfolio; performance guarantees; Universal algorithm; non-uniform random walks; non-financial applications; data compression; language modelin; competitive algorithm
A. Kalai, S. Vempala, "Efficient algorithms for universal portfolios," focs, pp.486, 41st Annual Symposium on Foundations of Computer Science, 2000
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