A Learnable Wavelet Transformer for Long-Short Equity Trading and Risk-Adjusted Return Optimization

Researchers developed WaveLSFormer, a wavelet-based Transformer model that directly generates market-neutral long/short trading portfolios from financial time series data. The AI system achieved a 60.7% cumulative return and 2.16 Sharpe ratio across six industry groups, significantly outperforming traditional ML models like LSTM and standard Transformers.