PortRSMs: Learning Regime Shifts for Portfolio Policy

This study proposes a novel Deep Reinforcement Learning (DRL) policy network structure for portfolio management called PortRSMs. PortRSMs employs stacked State-Space Models (SSMs) for the modeling of multi-scale continuous regime shifts in financial time series, striking a balance between exploring consistent distribution properties over short periods and maintaining sensitivity to sudden shocks in price sequences. PortRSMs also performs cross-asset regime fusion through hypergraph attention mechanisms, providing a more comprehensive state space for describing changes in asset correlations and co-integration. Experiments conducted on two different trading frequencies in the stock markets of the United States and Hong Kong show the superiority of PortRSMs compared to other approaches in terms of profitability, risk–return balancing, robustness, and the ability to handle sudden market shocks. Specifically, PortRSMs achieves up to a 0.03 improvement in the annual Sharpe ratio in the U.S. market, and up to a 0.12 improvement for the Hong Kong market compared to baseline methods.

Authors

Publication Details

Journal
Journal of risk and financial management
Published
2025-08-05
DOI
https://doi.org/10.3390/jrfm18080434
Citations
1
Primary Topic
Market Dynamics and Volatility
Type
article
Field-Weighted Citation Impact
3.13
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article

PortRSMs: Learning Regime Shifts for Portfolio Policy

Bingde Liu, Ryutaro Ichise
1 citations
Journal of risk and financial management
Market Dynamics and Volatility
3.13
article

PortRSMs: Learning Regime Shifts for Portfolio Policy

Bingde Liu, Ryutaro Ichise
article en
1 citations

Abstract

This study proposes a novel Deep Reinforcement Learning (DRL) policy network structure for portfolio management called PortRSMs. PortRSMs employs stacked State-Space Models (SSMs) for the modeling of multi-scale continuous regime shifts in financial time series, striking a balance between exploring consistent distribution properties over short periods and maintaining sensitivity to sudden shocks in price sequences. PortRSMs also performs cross-asset regime fusion through hypergraph attention mechanisms, providing a more comprehensive state space for describing changes in asset correlations and co-integration. Experiments conducted on two different trading frequencies in the stock markets of the United States and Hong Kong show the superiority of PortRSMs compared to other approaches in terms of profitability, risk–return balancing, robustness, and the ability to handle sudden market shocks. Specifically, PortRSMs achieves up to a 0.03 improvement in the annual Sharpe ratio in the U.S. market, and up to a 0.12 improvement for the Hong Kong market compared to baseline methods.

Journal of risk and financial managementVol. 18(8)
Openalex Percentile: Top 7%
Market Dynamics and Volatility
3.13
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