Designing Agentic AI-Based Screening for Portfolio Investment
Organizations: North Carolina State University, Nelson Hall, Department of Economics, NC 27695. · Columbia University. Department of Industrial Engineering and Operations Research and Columbia Business School. · Columbia University. Department of Industrial Engineering and Operations Research.
Abstract
We introduce a new agentic artificial intelligence (AI) platform for portfolio management. Our architecture consists of three layers. First, two large language model (LLM) agents are assigned specialized tasks: one agent screens for firms with desirable fundamentals, while a sentiment analysis agent screens for firms with desirable news. Second, these agents deliberate to generate and agree upon buy and sell signals from a large portfolio, substantially narrowing the pool of candidate assets. Finally, we apply a high-dimensional precision matrix estimation procedure to determine optimal portfolio weights. We show, through information acquisition theory, that screening with agentic AI can bring utility gains in screening compared with humans. We introduce the concept of sensible screening and establish that, under mild screening errors, the squared Sharpe ratio of the screened portfolio consistently estimates its target. Empirically, our method achieves superior Sharpe ratios relative to an unscreened baseline portfolio and to conventional screening approaches, evaluated on S&P~500 data over both short and medium terms.
Figures & tables
Appendix figures & tables4 assets
Supplementary material from the paper’s appendix.
Appendix
| Sharpe Ratio | Returns | Variance | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Method | GMV | MV | MSR | GMV | MV | MSR | GMV | MV | MSR |
| NW | 1.1247 | 0.6692 | 1.6025 | 0.1894 | 0.1131 | 0.2504 | 0.0283 | 0.0286 | 0.0244 |
| Residual NW | 1.2579 | 0.9681 | 4.5409 | 0.1956 | 0.1571 | 0.4691 | 0.0242 | 0.0263 | 0.0107 |
| Deep learning | 1.4625 | 1.0795 | 2.4936 | 0.2255 | 0.1684 | 0.3365 | 0.0238 | 0.0243 | 0.0182 |
| POET | 1.2240 | 0.7361 | 1.5136 | 0.1963 | 0.1164 | 0.2401 | 0.0257 | 0.0250 | 0.0252 |
| NLS | 1.5171 | 1.0169 | 4.2105 | 0.2121 | 0.1523 | 0.4430 | 0.0195 | 0.0224 | 0.0111 |
| Sharpe Ratio | Returns | Variance | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Method | GMV | MV | MSR | GMV | MV | MSR | GMV | MV | MSR |
| NW | 0.0179 | 0.4580 | -0.1263 | 0.0041 | 0.1248 | -0.0261 | 0.0516 | 0.0742 | 0.0425 |
| Residual NW | -0.0178 | 0.5791 | -0.0255 | -0.0038 | 0.1689 | -0.0060 | 0.0454 | 0.0851 | 0.0551 |
| Deep learning | 0.0672 | 0.5276 | -0.0323 | 0.0149 | 0.1415 | -0.0068 | 0.0494 | 0.0719 | 0.0442 |
| POET | 0.0529 | 0.4201 | -0.0090 | 0.0125 | 0.1112 | -0.0019 | 0.0554 | 0.0700 | 0.0452 |
| NLS | -0.0089 | 0.5506 | -0.0461 | -0.0019 | 0.1532 | -0.0112 | 0.0445 | 0.0774 | 0.0588 |
| Method | Turnover | Leverage | Concentration | Drawdown |
|---|---|---|---|---|
| Panel A: Global Minimum Variance (GMV) | ||||
| NW | 0.1134 | 1.1600 | 0.0064 | -0.1485 |
| Residual NW | 0.4053 | 2.6745 | 0.0438 | -0.1826 |
| Deep learning | 2.1449 | 8.9213 | 0.5458 | -0.1612 |
| POET | 0.2069 | 1.4847 | 0.0145 | -0.1443 |
| NLS | 0.6862 | 3.7686 | 0.0828 | -0.1578 |
| Method | Turnover | Leverage | Concentration | Drawdown |
|---|---|---|---|---|
| Panel A: Global Minimum Variance (GMV) | ||||
| NW | 1.2463 | 0.9148 | 0.1598 | -0.1341 |
| Residual NW | 1.6768 | 1.2479 | 0.3050 | -0.1131 |
| Deep learning | 1.3630 | 0.9336 | 0.1945 | -0.1159 |
| POET | 1.3385 | 0.9182 | 0.1536 | -0.1126 |
| NLS | 1.7377 | 1.2567 | 0.2884 | -0.1168 |
Finance
Finance studies markets, institutions, and financial decisions using data and models to understand risk, value, and resource allocation.
See all 281 papers