On-Line Portfolio Selection: A Survey

On-line portfolio selection is a fundamental problem in computational finance, which has been extensively studied across several research communities, including finance, statistics, artificial intelligence, machine learning, and data mining, etc. This article aims to provide a comprehensive survey and a structural understanding of existing on-line portfolio selection techniques in literature. From an on-line machine learning perspective, we first formulate on-line portfolio selection as an on-line sequential decision problem, and then survey a variety of state-of-the-art approaches in literature, which are grouped into several major categories, including benchmarks, "Follow-the-Winner" approaches, "Follow-the-Loser" approaches, "Pattern-Matching" based approaches, and meta-learning algorithms. In addition to the problem formulation and related algorithms, we also discuss the relationship of these algorithms with the Capital Growth theory in order to better understand the commons and differences of their underlying trading ideas. This article aims to provide a timely and comprehensive survey for both machine learning and data mining researchers in academia and quantitative portfolio managers in financial industry to help them understand the state of the art and facilitate their research or practical applications. We also discuss some open issues and evaluate some emerging new trends for future research directions.