Paper: arXiv 2510.17393

Authors: Kefan Chen, Hussain Ahmad, Diksha Goel, Claudia Szabo

Abstract

Large Language Models (LLMs) have recently gained popularity in stock trading for their ability to process multimodal financial data. However, most existing methods focus on single-stock trading and lack the capacity to reason over multiple candidates for portfolio construction. Moreover, they typically lack the flexibility to revise their strategies in response to market shifts, limiting their adaptability in real-world trading. To address these challenges, we propose 3S-Trader, a training-free framework that incorporates scoring, strategy, and selection modules for stock portfolio construction. The scoring module summarizes each stock’s recent signals into a concise report covering multiple scoring dimensions, enabling efficient comparison across candidates. The strategy module analyzes historical strategies and overall market conditions to iteratively generate an optimized selection strategy. Based on this strategy, the selection module identifies and assembles a portfolio by choosing stocks with higher scores in relevant dimensions. We evaluate our framework across four distinct stock universes, including the Dow Jones Industrial Average (DJIA) constituents and three sector-specific stock sets. Compared with existing multi-LLM frameworks and time-series-based baselines, 3S-Trader achieves the highest accumulated return of 131.83% on DJIA constituents with a Sharpe ratio of 0.31 and Calmar ratio of 11.84, while also delivering consistently strong results across other sectors.

Complexity vs Empirical Score

  • Math Complexity: 2.5/10
  • Empirical Rigor: 6.0/10 (capped from 8.0: transaction costs not modelled; see penalty flags)
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper focuses on an LLM-based framework with minimal advanced mathematical modeling, but presents extensive empirical results with specific performance metrics (returns, Sharpe, Calmar) and backtesting across multiple sectors.

Research Flowchart

  flowchart TD
  A["Research Goal: Adaptive Portfolio Construction using LLMs"] --> B["Data Input: Stock Prices, Financial News, Indicators"]
  B --> C{"3S-Trader Framework"}
  C --> D["Scoring Module: Summarize & Score Stocks"]
  C --> E["Strategy Module: Analyze Market & Optimize"]
  C --> F["Selection Module: Assemble Portfolio"]
  D --> G["Computational Process: Multi-LLM Reasoning"]
  E --> G
  F --> G
  G --> H["Outcome: High Returns & Sharpe Ratio"]
  H --> I["131.83% Return on DJIA (Sharpe 0.31, Calmar 11.84)"]
  H --> J["Consistent Performance Across Sectors"]

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4 of 55 cited works are in the corpus; resolved via arXiv source bundles, Semantic Scholar and OpenAlex. Corpus-wide: 2518 linked papers.