Randomized signature methods in optimal portfolio selection

We present convincing empirical results on the application of Randomized Signature Methods for non-linear, non-parametric drift estimation for a multi-variate financial market. Even though drift estimation is notoriously inaccurate due to small signal to noise ratio, one can still try to learn optimal non-linear maps from past data to conditional expectations of future returns for the purposes of portfolio optimization. Randomized Signatures, in contrast to classical signatures, allow for high dimensional markets and provide features on the same scale. We do not contribute to the theory of Randomized Signatures here, but rather present our empirical findings on portfolio selection in real world settings including real market data and transaction costs.

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Publication Details

Journal
Quantitative Finance
Published
2025-02-01
DOI
https://doi.org/10.1080/14697688.2025.2458613
Citations
1
Primary Topic
Financial Markets and Investment Strategies
Type
article
Field-Weighted Citation Impact
2.21
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article

Randomized signature methods in optimal portfolio selection

Erdinç Akyıldırım, Syang Zhou, Matteo Gambara, Josef Teichmann
1 citations
Quantitative Finance
Financial Markets and Investment Strategies
2.21
article

Randomized signature methods in optimal portfolio selection

Erdinç Akyıldırım, Syang Zhou, Matteo Gambara, Josef Teichmann
article en
1 citations

Abstract

We present convincing empirical results on the application of Randomized Signature Methods for non-linear, non-parametric drift estimation for a multi-variate financial market. Even though drift estimation is notoriously inaccurate due to small signal to noise ratio, one can still try to learn optimal non-linear maps from past data to conditional expectations of future returns for the purposes of portfolio optimization. Randomized Signatures, in contrast to classical signatures, allow for high dimensional markets and provide features on the same scale. We do not contribute to the theory of Randomized Signatures here, but rather present our empirical findings on portfolio selection in real world settings including real market data and transaction costs.

Quantitative FinanceVol. 25(2)
University of Nottingham (GB)
Openalex Percentile: Top 17%
Financial Markets and Investment Strategies
2.21
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Randomized signature methods in optimal portfolio selection — Erdinç Akyıldırım, Syang Zhou, et al. · Quantitative Finance (2025) | TGRS Research Map | TGRS