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A self-adaptive preference model based on dynamic feature analysis for interactive portfolio optimization

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Abstract

In financial markets, there are various assets to invest in. Recognizing an investor’s preferences is key to selecting a combination of assets that best serves his or her needs. Considering the mean–variance model for the portfolio optimization problem, this paper proposes an interactive multicriteria decision-making method and explores a self-adaptive preference model based on dynamic feature analysis (denoted RFFS-DT) to capture the decision maker (DM)’s complex preferences in the decision-making process. RFFS-DT recognizes the DM’s preference impact factor and constructs a preference model. To recognize the impact factors of the DM’s preferences, which could change during the decision-making process, three categories of possible features involved in three aspects of the mean–variance model are defined, and a feature selection method based on random forest is designed. Because the DM’s preference structure could be unknown a priori, a decision-tree-based preference model is built and updated adaptively according to the DM’s preference feedback and the selected features. The effectiveness of RFFS-DT for interactive multicriteria decision making is verified by a series of deliberately designed comparative experiments.

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Acknowledgments

The authors thank the referee for his or her comments on the manuscript. This work was supported in part by the NSFS under Grant No. ZR2016FM27and by the NSFC under Grant No. 61702139.

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Authors and Affiliations

  1. School of Economics and Management, Harbin Institute of Technology, No. 2 West Wenhua Road, Weihai, 264209, China

    Shicheng Hu, Fang Li & Song Wang

  2. School of Computer Science and Technology, Harbin Institute of Technology, No. 2 West Wenhua Road, Weihai, 264209, China

    Yang Liu

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  1. Shicheng Hu
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  2. Fang Li
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Correspondence to Shicheng Hu.

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Appendix

Appendix

See Table 9.

Table 9 The 18 selected stocks and their returns
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Hu, S., Li, F., Liu, Y. et al. A self-adaptive preference model based on dynamic feature analysis for interactive portfolio optimization. Int. J. Mach. Learn. & Cyber. 11, 1253–1266 (2020). https://doi.org/10.1007/s13042-019-01036-y

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