Self-organization types for autonomous investment portfolio

Following previous work this paper analyzes the portfolio investment process in the terms of a cybernetic system where the portfolio is the controlled system and the investor is the controlling system. As of now the financial markets have become very dynamic and complex environment which requires means of autonomy of the portfolio investment process relying on self-organization. The authors propose two types of implementation of self-organization for autonomous portfolio management - Type “A” has been already implemented in previous work, but it is compared to Type “B” which is the new contribution of this paper.

I. Introduction

Cybernetics presents a “new” unorthodox view for studying the process of portfolio management (Marchev, 2012). The science of cybernetics (and its closely connected fields — control theory and general system theory) is interdisciplinary and complex by nature, which makes it suitable for solving problems that are complex and dynamic such as investment portfolio management. The very essence of cybernetics is directed towards self-organization and adaptability through evolution. This also corresponds well to the complex and dynamic character of the free financial markets.