FGP: A genetic programming based tool for
financial forecasting
department of computer science, university of Essex, UK, (6 October 2000)Abstract
Computers-aided financial forecasting has been made
possible following continuous increase in machine power
at reduced price, increasingly easy access to financial
information, and advances in artificial intelligence
(AI) techniques. In this thesis, we present a genetic
programming based machine-learning tool called FGP
(Financial Genetic Programming). We apply FGP to
financial forecasting. Two versions of FGP, namely,
FGP-1 and FGP-2, have been designed and implemented to
address two research goals that we set. FGP-1 is
intended to improve prediction accuracy over the
predictions given. FGP-2 is aimed at improving
prediction precision.
Predictions are available to users from different
sources. We investigate whether FGP-1 has the
capability of improving on them by combining them
together. Based on the experiments presented in this
thesis, we conclude that FGP-1 is capable of improving
the given predictions in terms of prediction accuracy.
This partly attributes the capability of FGP-1 of
finding positive interactions between the predictions
given. However, caution should be excised for choosing
its parameters in such applications.
Improving prediction precision is highly demanded in
financial forecasting. Our investigation is based on a
set of specific prediction problems: to predict whether
a required rate of return can be achieved within a
user-specified period. In order to improve prediction
precision, without affecting the overall prediction
accuracy much, we invent a novel constrained fitness
function, which is used by FGP-2. The effectiveness of
FGP-2 is demonstrated and analysed in a variety of
prediction tasks and data sets. The constrained fitness
function provides the user with a handle to improve
prediction precision at the price of missing
opportunities.
This thesis reports the utility of FGP applications to
financial forecasting to a certain extent. As a tool,
FGP aims to help users make the best use of information
available to them. It may assist the user to make more
reliable decisions that would otherwise not be achieved
without it.