Machine learning-based portfolio optimization: comparative analysis with the all-weather portfolio strategy

This study investigates whether machine learning effectively processes high-dimensional data, a challenging task for traditional predictive models, to optimize portfolio strategies. Using daily data from December 2004 to July 2024, we compare various machine-learning models for asset allocation in an all-weather portfolio comprising exchange-traded funds for the S&P 500, long-term Treasury bonds, and gold. We find that the LASSO and elastic net models exhibit superior overall performance, whereas tree-based models excel in forecasting long-term Treasury bond returns. Portfolio strategies employing these models achieve Sharpe ratios near 0.70, substantially outperforming static benchmarks. The results demonstrate that machine learning can optimize portfolio performance in practical investment settings.

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Publication Details

Journal
Financial Innovation
Published
2026-04-27
DOI
https://doi.org/10.1186/s40854-026-00927-8
Primary Topic
Stock Market Forecasting Methods
Type
article
Field-Weighted Citation Impact
0.00

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article

Machine learning-based portfolio optimization: comparative analysis with the all-weather portfolio strategy

Yu Sung Ha, Jongho Kang, Jinwoo Kim, Dohyun Chun
Financial Innovation
Stock Market Forecasting Methods
article

Machine learning-based portfolio optimization: comparative analysis with the all-weather portfolio strategy

Yu Sung Ha, Jongho Kang, Jinwoo Kim, Dohyun Chun
article en

Abstract

This study investigates whether machine learning effectively processes high-dimensional data, a challenging task for traditional predictive models, to optimize portfolio strategies. Using daily data from December 2004 to July 2024, we compare various machine-learning models for asset allocation in an all-weather portfolio comprising exchange-traded funds for the S&P 500, long-term Treasury bonds, and gold. We find that the LASSO and elastic net models exhibit superior overall performance, whereas tree-based models excel in forecasting long-term Treasury bond returns. Portfolio strategies employing these models achieve Sharpe ratios near 0.70, substantially outperforming static benchmarks. The results demonstrate that machine learning can optimize portfolio performance in practical investment settings.

Financial InnovationVol. 12(1)
Chonnam National University (KR), Hong Kong Polytechnic University (HK), Kangwon National University (KR), Yonsei University (KR)
Ministry of Education, Ministry of Education, India
Openalex Percentile: Top 10%
Stock Market Forecasting Methods
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