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arXiv · 2508.18596

Linear Trading Position with Sparse Spectrum

Zhao-Rong Lai·Haisheng Yang
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Abstract

The principal portfolio approach is an emerging method in signal-based trading. However, these principal portfolios may not be diversified to explore the key features of the prediction matrix or robust to different situations. To address this problem, we propose a novel linear trading position with sparse spectrum that can explore a larger spectral region of the prediction matrix. We also develop a Krasnosel'ski\u \i-Mann fixed-point algorithm to optimize this trading position, which possesses the descent property and achieves a linear convergence rate in the objective value. This is a new theoretical result for this type of algorithms. Extensive experiments show that the proposed method achieves good and robust performance in various situations.

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Zhao-Rong Lai, Haisheng Yang. 2025-08-26. Linear Trading Position with Sparse Spectrum. https://arxiv.org/abs/2508.18596

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