Design and Evaluation of Machine Learning-Based Investment Strategies in Equity Funds

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Authors: Davi G. Silva, Estaner Claro Romão, Fabiano Fernandes Bargos
Cited by: 0
References: 16

Abstract

This study examines quantitative investment strategies for Brazilian equity funds, integrating traditional financial performance indicators with machine learning techniques to enhance fund selection. The main objective was to construct and validate predictive models for fund selection. The methodology involved collecting daily data from 2019 to 2025, computing a range of return and risk measures, and trained models to classify 1- and 3-month shifted windows. The 3-month models achieved the strongest predictive accuracy, exceeding 91%, with the Sharpe Ratio emerging as the most influential feature. A 12-month backtest (October/2024–September/2025) showed that ML-constructed portfolios delivered cumulative returns between 14.65% and 91.86%, depending on the selection criterion, substantially outperforming Brazil’s CDI risk-free benchmark (12.70%) and the Ibovespa (11.46%). These findings highlight the practical potential of ML-based fund selection, though successful implementation requires careful risk management and ongoing model validation.

Fields of Study & Subjects

Stock Market Forecasting Methods Financial Markets and Investment Strategies Financial Distress and Bankruptcy Prediction

Publication details

Journal / source
International Journal of Financial Studies
Volume
14
Issue
1
Pages
16–16
Publication date
7 January 2026
Language
EN