Chain-of-Alpha: Unleashing the Power of Large Language Models for Alpha Mining in Quantitative Trading
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arXiv
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| Format: | Preprint |
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2025
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| _version_ | 1866917030116982784 |
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| author | Cao, Lang |
| author_facet | Cao, Lang |
| contents | Alpha factor mining is a fundamental task in quantitative trading, aimed at discovering interpretable signals that can predict asset returns beyond systematic market risk. While traditional methods rely on manual formula design or heuristic search with machine learning, recent advances have leveraged Large Language Models (LLMs) for automated factor discovery. However, existing LLM-based alpha mining approaches remain limited in terms of automation, generality, and efficiency. In this paper, we propose Chain-of-Alpha, a novel, simple, yet effective and efficient LLM-based framework for fully automated formulaic alpha mining. Our method features a dual-chain architecture, consisting of a Factor Generation Chain and a Factor Optimization Chain, which iteratively generate, evaluate, and refine candidate alpha factors using only market data, while leveraging backtest feedback and prior optimization knowledge. The two chains work synergistically to enable high-quality alpha discovery without human intervention and offer strong scalability. Extensive experiments on real-world A-share benchmarks demonstrate that Chain-of-Alpha outperforms existing baselines across multiple metrics, presenting a promising direction for LLM-driven quantitative research. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2508_06312 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Chain-of-Alpha: Unleashing the Power of Large Language Models for Alpha Mining in Quantitative Trading Cao, Lang Computational Engineering, Finance, and Science Alpha factor mining is a fundamental task in quantitative trading, aimed at discovering interpretable signals that can predict asset returns beyond systematic market risk. While traditional methods rely on manual formula design or heuristic search with machine learning, recent advances have leveraged Large Language Models (LLMs) for automated factor discovery. However, existing LLM-based alpha mining approaches remain limited in terms of automation, generality, and efficiency. In this paper, we propose Chain-of-Alpha, a novel, simple, yet effective and efficient LLM-based framework for fully automated formulaic alpha mining. Our method features a dual-chain architecture, consisting of a Factor Generation Chain and a Factor Optimization Chain, which iteratively generate, evaluate, and refine candidate alpha factors using only market data, while leveraging backtest feedback and prior optimization knowledge. The two chains work synergistically to enable high-quality alpha discovery without human intervention and offer strong scalability. Extensive experiments on real-world A-share benchmarks demonstrate that Chain-of-Alpha outperforms existing baselines across multiple metrics, presenting a promising direction for LLM-driven quantitative research. |
| title | Chain-of-Alpha: Unleashing the Power of Large Language Models for Alpha Mining in Quantitative Trading |
| topic | Computational Engineering, Finance, and Science |
| url | https://arxiv.org/abs/2508.06312 |