Research On Application Of PID Control Algorithm In Active Portfolio

In recent years,with the maturity of the domestic financial market,people's investment behavior in the financial market is increasing,the passive investment strategy can no longer meet the needs of the public,and the active investment strategy is more popular.At the same time,with the deepening of the research on the financial field,the cross research between the financial field and other disciplines is also emerging.How to make effective decisions and build a high-yield portfolio has become the most concerned topic for investors.PID control algorithm has the advantages of simple principle,convenient use and strong robustness.In PID control algorithm,proportion can be regarded as control now,integration as correction,differentiation as control future,which is similar to people's research in the financial field.Therefore,the active portfolio constructed by PID control algorithm can help investors pursue higher returns.In this paper,the PID control algorithm is used to build the active portfolio,and compared with other investment methods.At first,the concrete steps of applying PID control algorithm to portfolio are given.Through the given multiple groups of PID control parameters,multiple portfolios are simulated to show the adjustment process of PID control algorithm to portfolio yields.The influence of PID control parameters on the process of portfolio yield control is analyzed.Secondly,the portfolio constructed by PID control algorithm,market value weighting,equal weight and portfolio constructed based on Markowitz model will be analyzed in terms of return,Sharpe ratio and information ratio,as well as risk measurement analysis in terms of volatility,tracking error,downside risk and other risk indicators.The advantages and disadvantages of the portfolio constructed by PID control algorithm and other methods are shown through analysis.Lastly,the CMA model is introduced to predict the yield of a single asset,and the predicted data is included into the original data set.Through the PID control algorithm,the asset weight of the portfolio in the forecast period is re-balanced,and the suggestions for asset allocation are given.The results show that(1)Different PID control links have different effects on the process of portfolio yield regulation.The proportion coefficient mainly affects the rising time of portfolio return series.Generally,the direction of integral coefficient is the same as that of proportional coefficient,which affects the stable time and overshoot of return series.In a certain range,the differential coefficient can stabilize the yield series and reduce the volatility of the yield series.(2)Based on the evaluation indexes of each year and the whole holding period as the measurement cycle:the portfolio constructed by PID control algorithm has a good performance in the holding period,and its yield is better than that constructed by other methods.The performance of the risk adjusted return index constructed by PID control algorithm is acceptable,but slightly worse than the mean variance portfolio,which also shows that it is not easy for the portfolio constructed by PID control algorithm to surpass the classic mean variance portfolio.In theory,PID control algorithm is suitable for long-term investment,high-yield investors who can take some risks.