Stock picking by Probability-Possibility approaches

Jean-Marc Le Caillec (), Alya Itani (), Didier Gueriot () and Yves Rakotondratsimba
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Jean-Marc Le Caillec: Lab-STICC_TB_CID_SFIIS - Lab-STICC - Laboratoire des sciences et techniques de l'information, de la communication et de la connaissance - UEB - Université européenne de Bretagne - European University of Brittany - ENIB - École Nationale d'Ingénieurs de Brest - UBS - Université de Bretagne Sud - UBO - Université de Brest - Télécom Bretagne - IBNM - Institut Brestois du Numérique et des Mathématiques - UBO - Université de Brest - ENSTA Bretagne - École Nationale Supérieure de Techniques Avancées Bretagne - IMT - Institut Mines-Télécom [Paris] - CNRS - Centre National de la Recherche Scientifique, ITI - Département Image et Traitement Information - UEB - Université européenne de Bretagne - European University of Brittany - Télécom Bretagne - IMT - Institut Mines-Télécom [Paris]
Alya Itani: Lab-STICC_TB_CID_SFIIS - Lab-STICC - Laboratoire des sciences et techniques de l'information, de la communication et de la connaissance - UEB - Université européenne de Bretagne - European University of Brittany - ENIB - École Nationale d'Ingénieurs de Brest - UBS - Université de Bretagne Sud - UBO - Université de Brest - Télécom Bretagne - IBNM - Institut Brestois du Numérique et des Mathématiques - UBO - Université de Brest - ENSTA Bretagne - École Nationale Supérieure de Techniques Avancées Bretagne - IMT - Institut Mines-Télécom [Paris] - CNRS - Centre National de la Recherche Scientifique, ITI - Département Image et Traitement Information - UEB - Université européenne de Bretagne - European University of Brittany - Télécom Bretagne - IMT - Institut Mines-Télécom [Paris], INFO - Département informatique - UEB - Université européenne de Bretagne - European University of Brittany - Télécom Bretagne - IMT - Institut Mines-Télécom [Paris]
Didier Gueriot: Lab-STICC_TB_CID_SFIIS - Lab-STICC - Laboratoire des sciences et techniques de l'information, de la communication et de la connaissance - UEB - Université européenne de Bretagne - European University of Brittany - ENIB - École Nationale d'Ingénieurs de Brest - UBS - Université de Bretagne Sud - UBO - Université de Brest - Télécom Bretagne - IBNM - Institut Brestois du Numérique et des Mathématiques - UBO - Université de Brest - ENSTA Bretagne - École Nationale Supérieure de Techniques Avancées Bretagne - IMT - Institut Mines-Télécom [Paris] - CNRS - Centre National de la Recherche Scientifique, ITI - Département Image et Traitement Information - UEB - Université européenne de Bretagne - European University of Brittany - Télécom Bretagne - IMT - Institut Mines-Télécom [Paris]
Yves Rakotondratsimba: Ecole Centrale d'Electronique

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Abstract: This paper presents a performance evaluation of stock picking by merging several technical indicators. Several fusion operators have been proposed either in the probabilistic or in the possibilistic framework. The latter fuzzy framework has been introduced to manage the uncertain information embedded in financial time series due to human biases as studied by behavioral finance. Performances of portfolio resulting from the proposed systems, are evaluated according to cumulative returns but also through a risk analysis point of view (Sharpe ratio). Two fusion mechanisms (one probabilistic, one possibilistic) aiming at discriminating common information from merged technical indicators, produce the higher portfolio performances. It also appears that selecting specific technical indicators affects the overall performances of the proposed stock picking systems. Indeed, studying the technical indicators selection through a shared/non shared information point of view, reveals possibilistic framework is more robust to redundant sources than probabilistic framework. Effects of some parameters used in the fusion algorithms (amount of assets, window length analysis, . . .) are also investigated. Results from all these tests clearly show the high potentiality of technical indicators fusion to improve portfolio performances. However, these first promising results have to be further inspected within wider contexts, as discussed at the end of the paper.

Keywords: Portfolio management; Time-series analysis; Probability; Possibilistic representation (search for similar items in EconPapers)
Date: 2017-04
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Citations: View citations in EconPapers (1)

Published in IEEE Transactions on Fuzzy Systems, 2017, 25 (2), pp.333 - 349. ⟨10.1109/TFUZZ.2016.2574921⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01498478

DOI: 10.1109/TFUZZ.2016.2574921

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