English

Leveraging Large Language Models for Institutional Portfolio Management: Persona-Based Ensembles

Computational Engineering, Finance, and Science 2024-12-02 v1 Multiagent Systems

Abstract

Large language models (LLMs) have demonstrated promising performance in various financial applications, though their potential in complex investment strategies remains underexplored. To address this gap, we investigate how LLMs can predict price movements in stock and bond portfolios using economic indicators, enabling portfolio adjustments akin to those employed by institutional investors. Additionally, we explore the impact of incorporating different personas within LLMs, using an ensemble approach to leverage their diverse predictions. Our findings show that LLM-based strategies, especially when combined with the mode ensemble, outperform the buy-and-hold strategy in terms of Sharpe ratio during periods of rising consumer price index (CPI). However, traditional strategies are more effective during declining CPI trends or sharp market downturns. These results suggest that while LLMs can enhance portfolio management, they may require complementary strategies to optimize performance across varying market conditions.

Keywords

Cite

@article{arxiv.2411.19515,
  title  = {Leveraging Large Language Models for Institutional Portfolio Management: Persona-Based Ensembles},
  author = {Yoshia Abe and Shuhei Matsuo and Ryoma Kondo and Ryohei Hisano},
  journal= {arXiv preprint arXiv:2411.19515},
  year   = {2024}
}

Comments

10 pages, 5 figures, submitted to The IEEE International Workshop on Large Language Models for Finance 2024