Automate Strategy Finding with LLM in Quant Investment

ArXiv ID: 2409.06289 “View on arXiv”

Authors: Unknown

Abstract

We present a novel three-stage framework leveraging Large Language Models (LLMs) within a risk-aware multi-agent system for automate strategy finding in quantitative finance. Our approach addresses the brittleness of traditional deep learning models in financial applications by: employing prompt-engineered LLMs to generate executable alpha factor candidates across diverse financial data, implementing multimodal agent-based evaluation that filters factors based on market status, predictive quality while maintaining category balance, and deploying dynamic weight optimization that adapts to market conditions. Experimental results demonstrate the robust performance of the strategy in Chinese & US market regimes compared to established benchmarks. Our work extends LLMs capabilities to quantitative trading, providing a scalable architecture for financial signal extraction and portfolio construction. The overall framework significantly outperforms all benchmarks with 53.17% cumulative return on SSE50 (Jan 2023 to Jan 2024), demonstrating superior risk-adjusted performance and downside protection on the market.

Keywords: Large Language Models (LLMs), Multi-Agent Systems, Alpha Factor Generation, Risk-Aware Optimization, Quantitative Strategy, Equities

Complexity vs Empirical Score

  • Math Complexity: 4.5/10
  • Empirical Rigor: 8.0/10
  • Quadrant: Street Traders
  • Why: The paper demonstrates high empirical rigor with detailed backtesting on specific markets, code availability, and specific metrics, but its mathematical formalization is relatively accessible, focusing on conceptual alpha formulation rather than deep derivations.
  flowchart TD
    A["Research Goal: Automate Strategy Finding<br/>for Quant Investment using LLMs"] --> B["Stage 1: Alpha Factor Generation<br/>Prompt-engineered LLMs analyze financial data"]
    B --> C["Stage 2: Multi-Agent Evaluation<br/>Risk-aware filtering & market status assessment"]
    C --> D["Stage 3: Dynamic Weight Optimization<br/>Adaptive to market regimes"]
    D --> E["Key Outcomes: 53.17% Cumulative Return<br/>on SSE50 (Jan 2023-2024)"]
    E --> F["Superior Risk-Adjusted Performance<br/>with Downside Protection"]
    
    %% Data Inputs
    B -.->|Financial Data| G["Chinese & US Market Data"]
    C -.->|Multi-modal Agents| H["Predictive Quality & Category Balance"]
    D -.->|Market Conditions| I["Dynamic Portfolio Construction"]