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Can the neuro fuzzy model predict stock indexes better than its rivals?

Author

Listed:
  • Chin-Shien Lin

    (Department of Finance, Providence University)

  • Haider Ali Khan

    (GSIS, University of Denver and CIRJE, Faculty of Economics, University of Tokyo)

  • Chi-Chung Huang

    (Graduate School of Business Administration, Providence University)

Abstract

This paper develops a model of a trading system by using neuro fuzzy framework in order to better predict the stock index. Thirty well-known stock indexes are analyzed with the help of the model developed here. The empirical results show strong evidence of nonlinearity in the stock index by using KD technical indexes. The trading point analysis and the sensitivity analysis of trading costs show the robustness and opportunity for making further profits through using the proposed nonlinear neuro fuzzy system. The scenario analysis also shows that the proposed neuro fuzzy system performs consistently over time.

Suggested Citation

  • Chin-Shien Lin & Haider Ali Khan & Chi-Chung Huang, 2002. "Can the neuro fuzzy model predict stock indexes better than its rivals?," CIRJE F-Series CIRJE-F-165, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2002cf165
    as

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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2002/2002cf165.pdf
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    References listed on IDEAS

    as
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    3. Basu, S, 1977. "Investment Performance of Common Stocks in Relation to Their Price-Earnings Ratios: A Test of the Efficient Market Hypothesis," Journal of Finance, American Finance Association, vol. 32(3), pages 663-682, June.
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    5. Brock, William & Lakonishok, Josef & LeBaron, Blake, 1992. "Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance, American Finance Association, vol. 47(5), pages 1731-1764, December.
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    7. Jensen, Michael C & Bennington, George A, 1970. "Random Walks and Technical Theories: Some Additional Evidence," Journal of Finance, American Finance Association, vol. 25(2), pages 469-482, May.
    8. Leung, Mark T. & Daouk, Hazem & Chen, An-Sing, 2000. "Forecasting stock indices: a comparison of classification and level estimation models," International Journal of Forecasting, Elsevier, vol. 16(2), pages 173-190.
    9. Bessembinder, Hendrik & Chan, Kalok, 1995. "The profitability of technical trading rules in the Asian stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 3(2-3), pages 257-284, July.
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    Citations

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    Cited by:

    1. Sergey SVESHNIKOV & Victor BOCHARNIKOV, 2009. "Eforecasting Financial Indexes With Model Of Composite Events Influence," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(3(9)_Fall).
    2. Muhammad Zubair Mumtaz, 2021. "Predicting Stock Indices Trends using Neuro-fuzzy Systems in COVID-19," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 26(2), pages 1-18, July-Dec.

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