Influence Diagram for Investment Portfolio Selection

Influence Diagram for Investment Portfolio Selection

Chui-Che Tseng (Texas A&M University, USA)
DOI: 10.4018/978-1-59140-649-5.ch003
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Abstract

The goal of an artificial intelligence decision support system is to provide the human user with an optimized decision recommendation when operating under uncertainty in complex environments. The particular focus of our discussion is the investment domain—the goal of investment decision making is to select an optimal portfolio that satisfies the investor’s objective or, in other words, to maximize the investment returns under the constraints given by investors. The investment domain contains numerous and diverse information sources, such as expert opinions, news releases, economic figures and so on. This presents the potential for better decision support but also poses the challenge of building a decision support agent for selecting, accessing, filtering, evaluating and incorporating information from different sources, and for making final investment recommendations. In this study we use an artificial intelligence system called influence diagram for portfolio selection. We found that the system outperform human portfolio managers and the market in the year of 1998 to 2002.

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Table of Contents
Chapter 1
Serge Hayward
In this chapter, I consider a design framework of a computational experiment in finance. The examination of statistics used for economic forecasts... Sample PDF
Financial Modeling and Forecasting with an Evolutionary Artificial Neural Network
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Chapter 2
Christopher Zapart, Satoshi Kishino, Tsutomu Mishina
This chapter describes a new procedure for designing optimum correlation measures for financial time series. The technique attempts to overcome some... Sample PDF
Pricing Basket Options with Optimum Wavelet Correlation Measures
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Chapter 3
Chui-Che Tseng
The goal of an artificial intelligence decision support system is to provide the human user with an optimized decision recommendation when operating... Sample PDF
Influence Diagram for Investment Portfolio Selection
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Chapter 4
Senlin Wu, Siddhartha Bhattacharyya
This chapter explores the minimal intelligence conditions for traders in a general double auction market with speculation activities. Using an... Sample PDF
Minimal Intelligence Agents in Double Auction Markets with Speculators
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Chapter 5
Lukáš Pichl, Ayako Watanabe
An optimal policy problem is formulated for evolutionary market settings and analyzed in two applications at the micro- and macrolevels. First... Sample PDF
Optimization of Individual and Regulatory Market Strategies with Genetic Algorithms
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Chapter 6
Yuriy Nemyvaka, Katia Sycara, Duane J. Seppi
The goal of this chapter is to establish an analytical foundation for electronic market making. We use two classes of models to reason about this... Sample PDF
Fundamental Issues in Automated Market Making
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Chapter 7
N. Feltovich
Human-participants experiments using markets with asymmetric information typically exhibit a “winner’s curse,” wherein bidders systematically bid... Sample PDF
Slow Learning in the Market fopr Lemons: A Note on Reinforcement Learning and the Winner's Circle
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Chapter 8
Yuya Sasaki, Nicholas S. Flann
This chapter demonstrates an application of agent-based selection dynamics to the traffic assignment problem. We introduce an evolutionary dynamic... Sample PDF
Multi-Agent Evolutionary ame Dynamics and Reinforcement Learning Applied to Online Optimization for the Traffic Policy
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Chapter 9
Edit J. Kaminsky, Holly Danker-McDermot, Freddie Douglas
This chapter discusses artificial computational intelligence methods as applied to cost prediction. We present the development of a suite of hybrid... Sample PDF
Fuzzy-Neural Cost Estimation for Engine Tests
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Chapter 10
Lukáš Pichl, Takuya Yamano
This chapter focuses on the principles of management in software development projects and optimization tools for managerial decision making... Sample PDF
Computer-Aided Management of Software Development in Small Companies
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Chapter 11
Ana Marostica, Cesar Briano
This chapter explains a hybrid-decision support system (HDSS) in which a heuristic-data mining procedure (a complement of a statistic-data mining)... Sample PDF
Modern Organizations and Decision-Making Processes: A Heuristic Approach
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Chapter 12
Seán Boyle, Stephen Guerin, Daniel Kunkle
This chapter reports on a multi-agent approach to the construction of a model of the English criminal justice system. The approach is an integration... Sample PDF
An Application of Multi-Agent Simulation to Policy Appraisal in the Criminal Justice System
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Chapter 13
Alexei G. Orlov
This chapter constructs a dynamic model of a multinational enterprise (MNE) to quantify the effects of various capital control policies on a firm’s... Sample PDF
Capital Controls and Firm's Dynamics
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Chapter 14
W. F. Lawless, M. Bergman, N. Feltovich
This chapter constructs a dynamic model of a multinational enterprise (MNE) to quantify the effects of various capital control policies on a firm’s... Sample PDF
A Physics of Organizational Uncertainty: Perturbations, Measurement and Computational Agents
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Chapter 15
Tsai-Lung Liu, Chia-Chen Kuo
This chapter employs a cross-theory perspective by combining the four theories of agency theory, resource-dependent theory, resource-based theory... Sample PDF
Reducing Agency Problem and Improving Organizational Value-Based Decision-Making Model of Inter-Organizational Strategic Alliance
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About the Authors