A taxonomy of literature reviews and experimental study of deepreinforcement learning in portfolio management

Abstract

Portfolio management involves choosing and actively overseeing various investment assets to meet an investor’s long-term financial goals, considering their risk tolerance and desired return potential. Traditional methods, like mean–variance analysis, often lack the flexibility needed to navigate the complexities of today’s financial markets. Recently, Deep Reinforcement Learning (DRL) has emerged as a promising approach, enabling continuous adjustments to investment strategies based on market feedback without explicit price predictions. This paper presents a comprehensive literature review of DRL applications in portfolio management, aimed at finance researchers, data scientists, AI experts, FinTech engineers, and students seeking advanced portfolio optimization methodologies. We also conducted an experimental study to evaluate five DRL algorithms—Advantage Actor-Critic (A2C), Deep Deterministic Policy Gradient (DDPG), Proximal Policy Optimization (PPO), Soft Actor-Critic (SAC), and Twin Delayed DDPG (TD3)—in managing a portfolio of 30 Dow Jones Industrial Average (DJIA) stocks. Their performance is compared with the DJIA index and traditional strategies, demonstrating DRL’s potential to improve portfolio outcomes while effectively managing risk.