Switching Portfolios

A constant rebalanced portfolio is an asset allocation algorithm which keeps the same distribution of wealth among a set of assets along a period of time. Recently, there has been work on on-line portfolio selection algorithms which are competitive with the best constant rebalanced portfolio determined in hindsight. By their nature, these algorithms employ the assumption that high returns can be achieved using a fixed asset allocation strategy. However, stock markets are far from being stationary and in many cases the wealth achieved by a constant rebalanced portfolio is much smaller than the wealth achieved by an ad-hoc investment strategy that adapts to changes in the market. In this paper we present an efficient Bayesian portfolio selection algorithm that is able to track a changing market. We also describe a simple extension of the algorithm for the case of a general transaction cost, including the transactions cost models recently investigated by Blum and kalai. We provide a simple analysis of the competitiveness of the algorithm and check its performance on real stock data from the New York Stock Exchange accumulated during a 22-year period.

Matrix Approximation under Local Low-Rank Assumption

Matrix approximation is a common tool in machine learning for building accurate prediction models for recommendation systems, text mining, and computer vision. A prevalent assumption in constructing matrix approximations is that the partially observed matrix is of low-rank. We propose a new matrix approximation model where we assume instead that the matrix is only locally of low-rank, leading to a representation of the observed matrix as a weighted sum of low-rank matrices. We analyze the accuracy of the proposed local low-rank modeling. Our experiments show improvements in prediction accuracy in recommendation tasks.

Beyond Word N-Grams

We describe, analyze, and evaluate experimentally a new probabilistic model for word-sequence prediction in natural language based on prediction suffix trees (PSTs). By using efficient data structures, we extend the notion of PST to unbounded vocabularies. We also show how to use a Bayesian approach based on recursive priors over all possible PSTs to efficiently maintain tree mixtures. These mixtures have provably and practically better performance than almost any single model. We evaluate the model on several corpora. The low perplexity achieved by relatively small PST mixture models suggests that they may be an advantageous alternative, both theoretically and practically, to the widely used n-gram models.