Financial News-Driven LLM Reinforcement Learning for Portfolio Management

ArXiv ID: 2411.11059 “View on arXiv”

Authors: Unknown

Abstract

Reinforcement learning (RL) has emerged as a transformative approach for financial trading, enabling dynamic strategy optimization in complex markets. This study explores the integration of sentiment analysis, derived from large language models (LLMs), into RL frameworks to enhance trading performance. Experiments were conducted on single-stock trading with Apple Inc. (AAPL) and portfolio trading with the ING Corporate Leaders Trust Series B (LEXCX). The sentiment-enhanced RL models demonstrated superior net worth and cumulative profit compared to RL models without sentiment and, in the portfolio experiment, outperformed the actual LEXCX portfolio’s buy-and-hold strategy. These results highlight the potential of incorporating qualitative market signals to improve decision-making, bridging the gap between quantitative and qualitative approaches in financial trading.

Keywords: Reinforcement Learning, Sentiment Analysis, Large Language Models, Trading Strategy, Portfolio Optimization, Equities

Complexity vs Empirical Score

• Math Complexity: 7.5/10
• Empirical Rigor: 4.5/10
• Quadrant: Lab Rats
• Why: The paper employs advanced mathematical concepts including Markov Decision Processes (MDPs), Bellman equations, and deep learning architectures (PPO, DQN), with substantial LaTeX notation and formulas. However, while it reports backtest results on specific datasets (AAPL, LEXCX), the excerpt lacks sufficient details on data sources, implementation code, or robust statistical validation metrics typically required for high empirical rigor.

  flowchart TD
    A["Research Goal<br>Improve RL Trading with LLM Sentiment"] --> B["Data & Inputs<br>Financial News & Market Data"]
    B --> C["Methodology<br>LLM Sentiment Analysis & RL Integration"]
    C --> D{"Computational Process"}
    D --> E["RL Model<br>without Sentiment"]
    D --> F["RL Model<br>with Sentiment"]
    E & F --> G["Backtesting on AAPL & LEXCX"]
    G --> H["Key Findings<br>Sentiment-enhanced RL outperforms"]
    H --> I["Outcomes<br>Higher Net Worth & Cumulative Profit"]