Taxable Stock Trading with Deep Reinforcement Learning
arXiv:1907.12093
summary
The paper uses deep reinforcement learning to develop stock trading strategies that account for capital gains taxes and tax rebates, showing that ignoring taxes can reduce portfolio returns by over 60%.
Abstract
In this paper, we propose stock trading based on the average tax basis. Recall that when selling stocks, capital gain should be taxed while capital loss can earn certain tax rebate. We learn the optimal trading strategies with and without considering taxes by reinforcement learning. The result shows that tax ignorance could induce more than 62% loss on the average portfolio returns, implying that taxes should be embedded in the environment of continuous stock trading on AI platforms.
Topics & keywords
#stock trading#reinforcement learning#tax-aware strategies#portfolio optimization#capital gains taxdeep reinforcement learningaverage tax basiscapital gains taxtax rebateoptimal trading strategy