Tucker Hybinette Balch

Srijan Sood, Kassiani Papasotiriou, Marius Vaiciulis et al.

Portfolio Management is the process of overseeing a group of investments, referred to as a portfolio, with the objective of achieving predetermined investment goals. Portfolio optimization is a key component that involves allocating the portfolio assets so as to maximize returns while minimizing risk taken. It is typically carried out by financial professionals who use a combination of quantitative techniques and investment expertise to make decisions about the portfolio allocation. Recent applications of Deep Reinforcement Learning (DRL) have shown promising results when used to optimize portfolio allocation by training model-free agents on historical market data. Many of these methods compare their results against basic benchmarks or other state-of-the-art DRL agents but often fail to compare their performance against traditional methods used by financial professionals in practical settings. One of the most commonly used methods for this task is Mean-Variance Portfolio Optimization (MVO), which uses historical time series information to estimate expected asset returns and covariances, which are then used to optimize for an investment objective. Our work is a thorough comparison between model-free DRL and MVO for optimal portfolio allocation. We detail the specifics of how to make DRL for portfolio optimization work in practice, also noting the adjustments needed for MVO. Backtest results demonstrate strong performance of the DRL agent across many metrics, including Sharpe ratio, maximum drawdowns, and absolute returns.

David Byrd, Vaikkunth Mugunthan, Antigoni Polychroniadou et al.

Privacy-preserving federated learning enables a population of distributed clients to jointly learn a shared model while keeping client training data private, even from an untrusted server. Prior works do not provide efficient solutions that protect against collusion attacks in which parties collaborate to expose an honest client's model parameters. We present an efficient mechanism based on oblivious distributed differential privacy that is the first to protect against such client collusion, including the "Sybil" attack in which a server preferentially selects compromised devices or simulates fake devices. We leverage the novel privacy mechanism to construct a secure federated learning protocol and prove the security of that protocol. We conclude with empirical analysis of the protocol's execution speed, learning accuracy, and privacy performance on two data sets within a realistic simulation of 5,000 distributed network clients.

David Byrd, Tucker Hybinette Balch

In finance, the weak form of the Efficient Market Hypothesis asserts that historic stock price and volume data cannot inform predictions of future prices. In this paper we show that, to the contrary, future intra-day stock prices could be predicted effectively until 2009. We demonstrate this using two different profitable machine learning-based trading strategies. However, the effectiveness of both approaches diminish over time, and neither of them are profitable after 2009. We present our implementation and results in detail for the period 2003-2017 and propose a novel idea: the use of such flexible machine learning methods as an objective measure of relative market efficiency. We conclude with a candidate explanation, comparing our returns over time with high-frequency trading volume, and suggest concrete steps for further investigation.