The construction of a robot investor

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Abstract
The ROBOT INVESTOR is an integrated system of computer heuristics based in part on human experience and port folio management theory. It is designed to receive information about the state of the current stock mar ket and the investor's existing portfolio and to translate this information into actions that will provide a reasonable and stable rate of return. This paper is the next logical step in the process. The robot forecasts the future price behavior of, and estimates risks of, individual stocks. This informa tion is passed to a decision model, which is designed to meet the dynamic real-world problem of continuous portfolio management. The Robot Investor includes a forecaster, a decision model, an accounting section, and an adaptive control section. The robot has been tested on a randomly selected list chosen from 740 major corporations traded on the New York and American Stock Exchanges and over the counter, using the monthly prices from January 1960 to December 1967. The results are competitive with those of mutual funds over the same period. An advanced model based on this study has significantly improved the performance of an investment club.