Cognitive Alpha Mining via LLM-Driven Code-Based Evolution

TL;DR

This paper introduces CogAlpha, a novel framework that combines large language model-driven reasoning with evolutionary search to discover more effective and interpretable financial predictive signals from complex data.

Contribution

It presents a new approach that leverages LLMs as cognitive agents to enhance structured exploration and alpha discovery in finance.

Findings

CogAlpha outperforms existing methods in predictive accuracy.

It demonstrates robustness and better generalization across datasets.

The framework enables more interpretable and diverse alpha signals.

Abstract

Discovering effective predictive signals, or "alphas," from financial data with high dimensionality and extremely low signal-to-noise ratio remains a difficult open problem. Despite progress in deep learning, genetic programming, and, more recently, large language model (LLM)-based factor generation, existing approaches still explore only a narrow region of the vast alpha search space. Neural models tend to produce opaque and fragile patterns, while symbolic or formula-based methods often yield redundant or economically ungrounded expressions that generalize poorly. Although different in form, these paradigms share a key limitation: none can conduct broad, structured, and human-like exploration that balances logical consistency with creative leaps. To address this gap, we introduce the Cognitive Alpha Mining Framework (CogAlpha), which combines code-level alpha representation with LLM-driven reasoning and evolutionary search. Treating LLMs as adaptive cognitive agents, our framework iteratively refines, mutates, and recombines alpha candidates through multi-stage prompts and financial feedback. This synergistic design enables deeper thinking, richer structural diversity, and economically interpretable alpha discovery, while greatly expanding the effective search space. Experiments on 5 stock datasets from 3 stock markets demonstrate that CogAlpha consistently discovers alphas with superior predictive accuracy, robustness, and generalization over existing methods. Our results highlight the promise of aligning evolutionary optimization with LLM-based reasoning for automated and explainable alpha discovery.