Temporal Representation Learning for Stock Similarities and Its Applications in Investment Management

ArXiv ID: 2407.13751 “View on arXiv”

Authors: Unknown

Abstract

In the era of rapid globalization and digitalization, accurate identification of similar stocks has become increasingly challenging due to the non-stationary nature of financial markets and the ambiguity in conventional regional and sector classifications. To address these challenges, we examine SimStock, a novel temporal self-supervised learning framework that combines techniques from self-supervised learning (SSL) and temporal domain generalization to learn robust and informative representations of financial time series data. The primary focus of our study is to understand the similarities between stocks from a broader perspective, considering the complex dynamics of the global financial landscape. We conduct extensive experiments on four real-world datasets with thousands of stocks and demonstrate the effectiveness of SimStock in finding similar stocks, outperforming existing methods. The practical utility of SimStock is showcased through its application to various investment strategies, such as pairs trading, index tracking, and portfolio optimization, where it leads to superior performance compared to conventional methods. Our findings empirically examine the potential of data-driven approach to enhance investment decision-making and risk management practices by leveraging the power of temporal self-supervised learning in the face of the ever-changing global financial landscape.

Keywords: Self-Supervised Learning, Temporal Generalization, Financial Time Series, Pairs Trading, Portfolio Optimization, Equities

Complexity vs Empirical Score

• Math Complexity: 7.5/10
• Empirical Rigor: 8.0/10
• Quadrant: Holy Grail
• Why: The paper uses advanced mathematical concepts including self-supervised learning and temporal domain generalization, requiring dense methodology, but also demonstrates high empirical rigor through extensive experiments on four real-world datasets with thousands of stocks and practical applications to investment strategies like pairs trading and portfolio optimization.

  flowchart TD
    A["Research Goal<br>Identify similar stocks<br>under market non-stationarity"] --> B["Methodology: SimStock<br>Self-Supervised Learning +<br>Temporal Domain Generalization"]
    B --> C["Input Data<br>4 Real-world datasets<br>Thousands of stocks"]
    C --> D["Computational Process<br>Learn robust time-series<br>representations"]
    D --> E["Findings: Applications & Outcomes<br>Superior performance in<br>Pairs Trading, Index Tracking,<br>& Portfolio Optimization"]