Robo-Advisor Algorithm with Intelligent View Model (지능형 전망모형을 결합한 로보어드바이저 알고리즘)
-
- Journal of Intelligence and Information Systems
- /
- v.25 no.2
- /
- pp.39-55
- /
- 2019
Recently banks and large financial institutions have introduced lots of Robo-Advisor products. Robo-Advisor is a Robot to produce the optimal asset allocation portfolio for investors by using the financial engineering algorithms without any human intervention. Since the first introduction in Wall Street in 2008, the market size has grown to 60 billion dollars and is expected to expand to 2,000 billion dollars by 2020. Since Robo-Advisor algorithms suggest asset allocation output to investors, mathematical or statistical asset allocation strategies are applied. Mean variance optimization model developed by Markowitz is the typical asset allocation model. The model is a simple but quite intuitive portfolio strategy. For example, assets are allocated in order to minimize the risk on the portfolio while maximizing the expected return on the portfolio using optimization techniques. Despite its theoretical background, both academics and practitioners find that the standard mean variance optimization portfolio is very sensitive to the expected returns calculated by past price data. Corner solutions are often found to be allocated only to a few assets. The Black-Litterman Optimization model overcomes these problems by choosing a neutral Capital Asset Pricing Model equilibrium point. Implied equilibrium returns of each asset are derived from equilibrium market portfolio through reverse optimization. The Black-Litterman model uses a Bayesian approach to combine the subjective views on the price forecast of one or more assets with implied equilibrium returns, resulting a new estimates of risk and expected returns. These new estimates can produce optimal portfolio by the well-known Markowitz mean-variance optimization algorithm. If the investor does not have any views on his asset classes, the Black-Litterman optimization model produce the same portfolio as the market portfolio. What if the subjective views are incorrect? A survey on reports of stocks performance recommended by securities analysts show very poor results. Therefore the incorrect views combined with implied equilibrium returns may produce very poor portfolio output to the Black-Litterman model users. This paper suggests an objective investor views model based on Support Vector Machines(SVM), which have showed good performance results in stock price forecasting. SVM is a discriminative classifier defined by a separating hyper plane. The linear, radial basis and polynomial kernel functions are used to learn the hyper planes. Input variables for the SVM are returns, standard deviations, Stochastics %K and price parity degree for each asset class. SVM output returns expected stock price movements and their probabilities, which are used as input variables in the intelligent views model. The stock price movements are categorized by three phases; down, neutral and up. The expected stock returns make P matrix and their probability results are used in Q matrix. Implied equilibrium returns vector is combined with the intelligent views matrix, resulting the Black-Litterman optimal portfolio. For comparisons, Markowitz mean-variance optimization model and risk parity model are used. The value weighted market portfolio and equal weighted market portfolio are used as benchmark indexes. We collect the 8 KOSPI 200 sector indexes from January 2008 to December 2018 including 132 monthly index values. Training period is from 2008 to 2015 and testing period is from 2016 to 2018. Our suggested intelligent view model combined with implied equilibrium returns produced the optimal Black-Litterman portfolio. The out of sample period portfolio showed better performance compared with the well-known Markowitz mean-variance optimization portfolio, risk parity portfolio and market portfolio. The total return from 3 year-period Black-Litterman portfolio records 6.4%, which is the highest value. The maximum draw down is -20.8%, which is also the lowest value. Sharpe Ratio shows the highest value, 0.17. It measures the return to risk ratio. Overall, our suggested view model shows the possibility of replacing subjective analysts's views with objective view model for practitioners to apply the Robo-Advisor asset allocation algorithms in the real trading fields.
The wave of Avant-garde swept away all in the unique social background so called 'October Revolution' and the early 1900 Russian society which was able to absorb and accept anything. The Russian avant-garde has been affected by the Cubism and the Futurism those had peculiarly appeared in the early twentieth century, spreaded out to three spheres: the Suprematism, the Rayonism and the Constructivism. The Russian Constructivism has appeared in this background, concretely and ideally ex-pressed the ideology of the revolution into the artistic form and made an huge influence to the whole Russian society. The Constructivist like Tatlin, naum Gabo, Pevaner, Rodchenko, Stepanova, Popova and Exter gave great effect on the Soviet Constructive fashion design in 1920's after the Revolution. The Soviet costume in 1920s hold in common the characteristicss of the Constructive graphic as it is, geometrical and abstractive form, energetic and motility. In fashion design, these graphic qualities have been showed as the application of geometrical form and architectural image, physical distortion and transformation. And in textile design, the simple, dynamical presentation has been appeared. We can classify the Soviet costume at this time into three occasions. The first term is from late 1910 th mid 1920, and it is altered from folk costume design to modern one. With Lamanova as the first on the list, using the folk mitif, the Constructive expression of simple form has been gradually revealed in design. Designers like Makarova, Pribylskaia and Mukhina produced the plane, simple chemise style with the decoration of the Russian traditional motif. From early to late 1920 is the second term, and it is at the pick of the most active processing of the Constructive design. Not only at the costume in daily life but also at the theatrical costume and textile, the con-structive design has been represented all avail-able fields. Many Constructivists including Stepanova, Popova, Exter and Rodchenko took part in the textile design and costume design so as to evlvo their aesthetic concept. The third term is from late 1920 to early 1930. The socialistic realism has dominated over the whole culture and art, the revolutionary dynamic motif has been presented also in textile design. The formative features of Soviet Constructive fashion design are; silhouette, from, motif, color and fabric. The first, the silhouette : a straight rectangular silhouetted has been expressed through the whole period and a volumed one with distorted human body shape has introduced in the theatrical costume design. The second, the form: many lengthened rectangular forms have been made at beginnings, but to the middle period, geometrical, architectural forms have been more showed and there are energy and movement in design. At the last period, only a partial feature-division has been seen. The third, the motif; no pattern or ethnic motif has been partly used at beginnings, a figure like circle, tri-angle has gradually appeared in textile design. At latter period, a real-existent motif like an airplane has been represented with graphing and simplicity. The fourth, the color ; because of insufficient dyeing, neutral color like black or grey color has been mainly covered, but after middle term, a primary color or pastel tone has been seen, contrast of the fabric; without much development of textile industry after the Revolution, thick and durable fabrics have been the main stream, but as time had going to the last period, fabrics such as linen, cotton, velvet and silk have been varously choesn. At the theatrical costume, new materials like plastics and metals that were able to accentuate the form. The pursuit of popularity, simplicity and functionalism that the basic concept of Constructive fashion is one of the "beauty" which has been searching in modern fashion. And now we can appreciate how innovative and epochal this Soviet Constructive fashion movement was.ement was.