dorsal/arxiv
View SchemaIncorporating Cognitive Biases into Reinforcement Learning for Financial Decision-Making
| Authors | Liu He |
|---|---|
| Categories | |
| ArXiv ID | 2601.08247vv1 |
| URL | https://arxiv.org/abs/2601.08247 |
| License | http://creativecommons.org/licenses/by/4.0/ |
Abstract
Financial markets are influenced by human behavior that deviates from rationality due to cognitive biases. Traditional reinforcement learning (RL) models for financial decision-making assume rational agents, potentially overlooking the impact of psychological factors. This study integrates cognitive biases into RL frameworks for financial trading, hypothesizing that such models can exhibit human-like trading behavior and achieve better risk-adjusted returns than standard RL agents. We introduce biases, such as overconfidence and loss aversion, into reward structures and decision-making processes and evaluate their performance in simulated and real-world trading environments. Despite its inconclusive or negative results, this study provides insights into the challenges of incorporating human-like biases into RL, offering valuable lessons for developing robust financial AI systems.
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"abstract": "Financial markets are influenced by human behavior that deviates from rationality due to cognitive biases. Traditional reinforcement learning (RL) models for financial decision-making assume rational agents, potentially overlooking the impact of psychological factors. This study integrates cognitive biases into RL frameworks for financial trading, hypothesizing that such models can exhibit human-like trading behavior and achieve better risk-adjusted returns than standard RL agents. We introduce biases, such as overconfidence and loss aversion, into reward structures and decision-making processes and evaluate their performance in simulated and real-world trading environments. Despite its inconclusive or negative results, this study provides insights into the challenges of incorporating human-like biases into RL, offering valuable lessons for developing robust financial AI systems.",
"arxiv_id": "2601.08247",
"authors": [
"Liu He"
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"categories": [
"cs.LG",
"econ.EM"
],
"license": "http://creativecommons.org/licenses/by/4.0/",
"title": "Incorporating Cognitive Biases into Reinforcement Learning for Financial Decision-Making",
"url": "https://arxiv.org/abs/2601.08247",
"version": "v1"
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