A hybrid neurogenetic approach for stock forecasting.
In this paper, we propose a hybrid neurogenetic system for stock trading. A recurrent neural network (NN) having one hidden layer is used for the prediction model. The input features are generated from a number of technical indicators being used by financial experts. The genetic algorithm (GA) optimizes the NN's weights under a 2-D encoding and crossover. We devised a context-based ensemble method of NNs which dynamically changes on the basis of the test day's context. To reduce the time in processing mass data, we parallelized the GA on a Linux cluster system using message passing interface. We tested the proposed method with 36 companies in NYSE and NASDAQ for 13 years from 1992 to 2004. The neurogenetic hybrid showed notable improvement on the average over the buy-and-hold strategy and the context-based ensemble further improved the results. We also observed that some companies were more predictable than others, which implies that the proposed neurogenetic hybrid can be used for financial portfolio construction.
Kwon
Yung-Keun
YK
School of Computer Science and Engineering, Seoul National University, Seoul 151-742, Korea. kwon@soar.snu.ac.kr
Moon
Byung-Ro
BR
D000465:Algorithms; D001185:Artificial Intelligence; D003132:Commerce / Q000379:methods* / Q000639:trends*; D003198:Computer Simulation; D003661:Decision Support Techniques; D005544:Forecasting / Q000379:methods*; D016247:Information Storage and Retrieval / Q000379:methods*; D018803:Models, Economic; D016571:Neural Networks, Computer; D010363:Pattern Recognition, Automated / Q000379:methods