USING NON-PARAMETRIC SEARCH ALGORITHMS TO FORECAST DAILY EXCESS STOCK RETURNS

Nathan Lael Joseph, David S. Brée and Efstathios Kalyvas

A chapter in Applications of Artificial Intelligence in Finance and Economics, 2004, pp 93-125 from Emerald Group Publishing Limited

Abstract: Are the learning procedures of genetic algorithms (GAs) able to generate optimal architectures for artificial neural networks (ANNs) in high frequency data? In this experimental study, GAs are used to identify the best architecture for ANNs. Additional learning is undertaken by the ANNs to forecast daily excess stock returns. No ANN architectures were able to outperform a random walk, despite the finding of non-linearity in the excess returns. This failure is attributed to the absence of suitable ANN structures and further implies that researchers need to be cautious when making inferences from ANN results that use high frequency data.

Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aecozz:s0731-9053(04)19004-x

DOI: 10.1016/S0731-9053(04)19004-X

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