European exchange trading funds trading with locally weighted support vector regression

In this paper, two different Locally Weighted Support Vector Regression (wSVR) algorithms are generated and applied to the task of forecasting and trading five European Exchange Traded Funds. The trading application covers the recent European Monetary Union debt crisis. The performance of the proposed models is benchmarked against traditional Support Vector Regression (SVR) models. The Radial Basis Function, the Wavelet and the Mahalanobis kernel are explored and tested as SVR kernels. Finally, a novel statistical SVR input selection procedure is introduced based on a principal component analysis and the Hansen, Lunde, and Nason (2011) model confidence test. The results demonstrate the superiority of the wSVR models over the traditional SVRs and of the v-SVR over the ε-SVR algorithms. We note that the performance of all models varies and considerably deteriorates in the peak of the debt crisis. In terms of the kernels, our results do not confirm the belief that the Radial Basis Function is the optimum choice for financial series

Soft computing techniques applied to finance

Soft computing is progressively gaining presence in the financial world. The number of real and potential applications is very large and, accordingly, so is the presence of applied research papers in the literature. The aim of this paper is both to present relevant application areas, and to serve as an introduction to the subject. This paper provides arguments that justify the growing interest in these techniques among the financial community and introduces domains of application such as stock and currency market prediction, trading, portfolio management, credit scoring or financial distress prediction areas.Publicad

Providing Transaction Class-Based QoS in In-Memory Data Grids via Machine Learning

Elastic architectures and the ”pay-as-you-go” resource pricing model offered by many cloud infrastructure providers may seem the right choice for companies dealing with data centric applications characterized by high variable workload. In such a context, in-memory transactional data grids have demonstrated to be particularly suited for exploiting advantages provided by elastic computing platforms, mainly thanks to their ability to be dynamically (re-)sized and tuned. Anyway, when specific QoS requirements have to be met, this kind of architectures have revealed to be complex to be managed by humans. Particularly, their management is a very complex task without the stand of mechanisms supporting run-time automatic sizing/tuning of the data platform and the underlying (virtual) hardware resources provided by the cloud. In this paper, we present a neural network-based architecture where the system is constantly and automatically re-configured, particularly in terms of computing resources

Modeling Financial Time Series with Artificial Neural Networks

Financial time series convey the decisions and actions of a population of human actors over time. Econometric and regressive models have been developed in the past decades for analyzing these time series. More recently, biologically inspired artificial neural network models have been shown to overcome some of the main challenges of traditional techniques by better exploiting the non-linear, non-stationary, and oscillatory nature of noisy, chaotic human interactions. This review paper explores the options, benefits, and weaknesses of the various forms of artificial neural networks as compared with regression techniques in the field of financial time series analysis.CELEST, a National Science Foundation Science of Learning Center (SBE-0354378); SyNAPSE program of the Defense Advanced Research Project Agency (HR001109-03-0001

Modeling, forecasting and trading the EUR exchange rates with hybrid rolling genetic algorithms: support vector regression forecast combinations

The motivation of this paper is to introduce a hybrid Rolling Genetic Algorithm-Support Vector Regression (RG-SVR) model for optimal parameter selection and feature subset combination. The algorithm is applied to the task of forecasting and trading the EUR/USD, EUR/GBP and EUR/JPY exchange rates. The proposed methodology genetically searches over a feature space (pool of individual forecasts) and then combines the optimal feature subsets (SVR forecast combinations) for each exchange rate. This is achieved by applying a fitness function specialized for financial purposes and adopting a sliding window approach. The individual forecasts are derived from several linear and non-linear models. RG-SVR is benchmarked against genetically and non-genetically optimized SVRs and SVMs models that are dominating the relevant literature, along with the robust ARBF-PSO neural network. The statistical and trading performance of all models is investigated during the period of 1999–2012. As it turns out, RG-SVR presents the best performance in terms of statistical accuracy and trading efficiency for all the exchange rates under study. This superiority confirms the success of the implemented fitness function and training procedure, while it validates the benefits of the proposed algorithm

Evolutionary rule-based system for IPO underpricing prediction

Genetic And Evolutionary Computation Conference. Washington DC, USA, 25-29 June 2005Academic literature has documented for a long time the existence of important price gains in the first trading day of initial public offerings (IPOs).Most of the empirical analysis that has been carried out to date to explain underpricing through the offering structure is based on multiple linear regression. The alternative that we suggest is a rule-based system defined by a genetic algorithm using a Michigan approach. The system offers significant advantages in two areas, 1) a higher predictive performance, and 2) robustness to outlier patterns. The importance of the latter should be emphasized since the non-trivial task of selecting the patterns to be excluded from the training sample severely affects the results.We compare the predictions provided by the algorithm to those obtained from linear models frequently used in the IPO literature. The predictions are based on seven classic variables. The results suggest that there is a clear correlation between the selected variables and the initial return, therefore making possible to predict, to a certain extent, the closing price.This article has been financed by the Spanish founded research MCyT project TRACER, Ref: TIC2002-04498-C05-04M