An adaptive forecasting approach for copper price volatility through hybrid and non-hybrid models

This article studies monthly volatility forecasting for the copper market, which is of practical interest for various participants such as producers, consumers, governments, and investors.Using data from 1990 to 2016, we propose a framework composed of a set of time series models such as Auto-Regressive Integrated Moving Average (ARIMA) and Generalized Auto-Regressive Conditional Heteroskedasticity (GARCH), non-parametric models from soft computing, e.g. Artificial Neural Networks (ANN) and Fuzzy Inference Systems (FIS), and hybrid specifications of both. The adaptability characteristic of these models in exogenous variables, their configuration parameters and window size, simultaneously, are provided by a Genetic Algorithm in pursuit of achieving the best possible forecasts. Also, recognized drivers of this specific market are considered.We examine out-of-sample performance based on Heteroskedasticity-adjusted Mean Squared Error (HMSE), and we test model superiority using the Model Confidence Set (MCS). The results show that making forecasts using an adaptive technique is crucial to obtaining robust and improved performance. The Adaptive-GARCH–FIS specification yielded the best forecasting power.     

Bayesian testing for non-linearity in volatility modeling

Neural networks provide a tool for describing non-linearity in volatility processes of financial data and help to answer the question “how much” non-linearity is present in the data. Non-linearity is studied under three different specifications of the conditional distribution: Gaussian, Student-t and mixture of Gaussians. To rank the volatility models, a Bayesian framework is adopted to perform a Bayesian model selection within the different classes of models. In the empirical analysis, the return series of the Dow Jones Industrial Average index, FTSE 100 and NIKKEI 225 indices over a period of 16 years are studied. The results show different behavior across the three markets. In general, if a statistical model accounts for non-normality and explains most of the fat tails in the conditional distribution, then there is less need for complex non-linear specifications.     

Forecasting the volatility of stock price index

Accurate volatility forecasting is the core task in the risk management in which various portfolios’ pricing, hedging, and option strategies are exercised. Prior studies on stock market have primarily focused on estimation of stock price index by using financial time series models and data mining techniques. This paper proposes hybrid models with neural network and time series models for forecasting the volatility of stock price index in two view points: deviation and direction. It demonstrates the utility of the hybrid model for volatility forecasting. This model demonstrates the utility of the neural network forecasting combined with time series analysis for the financial goods.     

Volatility forecast using hybrid Neural Network models

In this research the testing of a hybrid Neural Networks-GARCH model for volatility forecast is performed in three Latin-American stock exchange indexes from Brazil, Chile and Mexico. A detail of the methodology and application of the volatility forecast of financial series using a hybrid artificial Neural Network model are presented.The results demonstrate that the ANN models can improve the forecasting performance of the GARCH models when studied in the three Latin-American markets and it is shown that the results are robust and consistent for different ANN specifications and different volatility measures.     

Forecasting volatility for the stock market: a new hybrid model

This study presents a new hybrid model that combines the grey forecasting model with the GARCH to improve the variance forecasting ability in variance as compared to the traditional GARCH. A range-based measure of ex post volatility is employed as a proxy for the unobservable volatility process in evaluating the forecasting ability due to true underlying volatility process not being observed. Overall, the results show that the new hybrid model can enhance the volatility forecasting ability of the traditional GARCH.     

A new hybrid evolutionary mechanism based on unsupervised learning for Connectionist Systems

Recent studies have confirmed that the modulation of synaptic efficacy affects emergent behaviour of brain cells assemblies. We report the first results of adding up the behaviour of particular brain circuits to Artificial Neural Networks. A new hybrid learning method has emerged. In order to find the best solution to a given problem, this method combines the use of Genetic Algorithms with particular changes to connection weights based on this behaviour. We show this combination in feed-forward multilayer architectures initially created to solve classification problems and we illustrate the benefits obtained with this new method.     

A hybrid approach of neural networks and grey modeling for adaptive electricity load forecasting

This paper proposes an effective fusion of neural networks and grey modeling for adaptive electricity load forecasting. The fusion employs the complementary strength of these two appealing techniques. In terms of forecasting accuracy, the proposed fusion scheme outperforms the individual ones and the statistical autoregressive methods according to the results of a substantial number of experiments. In addition to the fusion scheme, this paper also proposes a grey relational analysis to automatically assess the importance of each input variable for the forecasting task. This analysis helps the forecaster choose dominant ones among the many input variables, thus removing much burden of acquiring professional domain knowledge for problems and reducing the interference of irrelevant inputs on the forecasting. Experimental results are shown in this paper to verify the effectiveness of the grey relational analysis.     

A new class of hybrid models for time series forecasting

Applying quantitative models for forecasting and assisting investment decision making has become more indispensable in business practices than ever before. Improving forecasting especially time series forecasting accuracy is an important yet often difficult task facing forecasters. Both theoretical and empirical findings have indicated that integration of different models can be an effective way of improving upon their predictive performance, especially when the models in the ensemble are quite different. In the literature, several hybrid techniques have been proposed by combining different time series models together, in order to overcome the deficiencies of single models and yield hybrid models that are more accurate. In this paper, in contrast of the traditional hybrid models, a new methodology is proposed in order to construct a new class of hybrid models using a time series model as basis model and a classifier. As classifiers cannot be lonely applied as forecasting model for continuous problems, in the first stage of the proposed model, a forecasting model is used as basis model. Then, the estimated values of the basis model are modified in the second stage, based on the distinguished trend of the residuals of the basis model and the optimum step length, which are respectively calculated by a classifier model and a mathematical programming model. Empirical results with three well-known real data sets indicate that the proposed model can be an effective way in order to construct a more accurate hybrid model than its basis time series model. Therefore, it can be used as an appropriate alternative model for forecasting tasks, especially when higher forecasting accuracy is needed.     

A hybrid fuzzy and neural approach for DRAM price forecasting

The trend in the price of dynamic random access memory (DRAM) is a very important prosperity index in the semiconductor industry. To further enhance the performance of DRAM price forecasting, a hybrid fuzzy and neural approach is proposed in this study. In the proposed approach, multiple experts construct their own fuzzy multiple linear regression models from various viewpoints to forecast the price of a DRAM product. Each fuzzy multiple linear regression model can be converted into two equivalent nonlinear programming problems to be solved. To aggregate these fuzzy price forecasts, a two-step aggregation mechanism is applied. At the first step, fuzzy intersection is applied to aggregate the fuzzy price forecasts into a polygon-shaped fuzzy number, in order to improve the precision. After that, a back propagation network is constructed to defuzzify the polygon-shaped fuzzy number and to generate a representative/crisp value, so as to enhance the accuracy. A real example is used to evaluate the effectiveness of the proposed methodology. According to experimental results, the proposed methodology improved both the precision and accuracy of DRAM price forecasting by 66% and 43%, respectively.     

Adaptive Fuzzy-GARCH model applied to forecasting the volatility of stock markets using particle swarm optimization

Fluctuations in the stock market follow the principle of volatility clustering in which changes are cataloged by similarity; as such, large changes tend to follow large changes, and small changes tend to follow small changes. This clustering is one of the major reasons why many generalized autoregression conditional heteroscedasticity (GARCH) models do not forecast the stock market well. In this paper, an adaptive Fuzzy-GARCH model with particle swarm optimization (PSO) is proposed to solve this problem.The adaptive Fuzzy-GARCH model refers to both GARCH models and the parameters of membership functions, which are determined by the characteristics of market itself. Here, we present an iterative algorithm based on PSO to estimate the parameters of the membership functions. The PSO method aims to achieve a global optimal solution with a rapid convergence rate. The three stock markets of Taiwan, Japan, and Germany were analyzed to illustrate the performance of the proposed method.     

A hybrid genetic-neural architecture for stock indexes forecasting

In this paper, a new approach for time series forecasting is presented. The forecasting activity results from the interaction of a population of experts, each integrating genetic and neural technologies. An expert of this kind embodies a genetic classifier designed to control the activation of a feedforward artificial neural network for performing a locally scoped forecasting activity. Genetic and neural components are supplied with different information: The former deal with inputs encoding information retrieved from technical analysis, whereas the latter process other relevant inputs, in particular past stock prices. To investigate the performance of the proposed approach in response to real data, a stock market forecasting system has been implemented and tested on two stock market indexes, allowing for account realistic trading commissions. The results pointed to the good forecasting capability of the approach, which repeatedly outperformed the “Buy and Hold” strategy.     

A class of nonlinear stochastic volatility models and its implications for pricing currency options

A class of stochastic volatility (SV) models is proposed by applying the Box-Cox transformation to the volatility equation. This class of nonlinear SV (N-SV) models encompasses all standard SV models, including the well-known lognormal (LN) SV model. It allows to empirically compare and test all standard specifications in a very convenient way and provides a measure of the degree of departure from the classical models. A likelihood-based technique is developed for analyzing the model. Daily dollar/pound exchange rate data provide some evidence against LN model and strong evidence against all the other classical specifications. An efficient algorithm is proposed to study the economic importance of the proposed model on pricing currency options.     

A hybrid modular neural network architecture with fuzzy Sugeno integration for time series forecasting

We describe in this paper the application of a modular neural network architecture to the problem of simulating and predicting the dynamic behavior of complex economic time series. We use several neural network models and training algorithms to compare the results and decide at the end, which one is best for this application. We also compare the simulation results with the traditional approach of using a statistical model. In this case, we use real time series of prices of consumer goods to test our models. Real prices of tomato in the U.S. show complex fluctuations in time and are very complicated to predict with traditional statistical approaches. For this reason, we have chosen a neural network approach to simulate and predict the evolution of these prices in the U.S. market.     

BP算法和对称ARCH类模型对股市波动性预测的实证比较

利用我国深圳股票市场的实际数据,建立了相应的BP算法网络预测模型和ARCH(1),GARCH(1,1)预测模型,分别用来对深成指数每个周末收盘价的波动性进行预测．研究表明,BP算法对样本外观测值的上凸曲线拟合得较好,对下凸曲线的拟合效果较差;ARCH(1)和GARCH(1,1)则反之,其预测曲线对样本外观测值的下凸曲线拟合效果都较好,但对上凸曲线的拟合效果都较差．通过采用6种常用的预测误差统计量:平均误差、平均绝对误差、均方根误差、平均绝对比率误差、Akaike信息准则、Baves信息准则对样本外数据的预测结果进行检验,BP算法的预测效果最好,ARCH(1)模型次之,GARcH(1,1)模型偏差．     

A hybrid optimized error correction system for time series forecasting

Time series forecasting is a challenging task in machine learning. Real world time series are often composed by linear and nonlinear structures which need to be mapped by some forecasting method. Linear methods such as autoregressive integrated moving average (ARIMA) and nonlinear methods such as artificial neural networks (ANNs) could be employed to handle such problems, however model misspecification hinders the forecasting process producing inaccurate models. Hybrid models based on error forecasting and combination can reduce the misspecification of single models and improve the accuracy of the system. This work proposes a hybrid system that is composed of three parts: a) linear modeling of the time series, b) nonlinear modeling of the error series, and c) combination of the forecasts using three distinct approaches. The system performs a search for the best parameters of the linear and nonlinear components, and of the combination approaches. Particle swarm optimization is used to find suitable architecture and weights. Experiments show that the proposed technique achieved promising results in time series forecasting.     

Measuring actual daily volatility from high frequency intraday returns of the S&P futures and index observations

In this study 10 min frequency realized variance series are used to forecast the volatility of S&P 500 index (SPX) daily returns. The logarithm-transformed realized variances are modeled directly in the AR(FI)MA model specification in which the structure of the model is optimized using the AICc criterion. As reported in previous literature, the approximately normal structure of distribution of the logarithm-transformed realized variance series can be modeled directly in structure of the AR(FI)MA process. However, in this study, it is recognized the statistically significant non-normal property of the logarithm-transformed realized variances. Hence, to forecast volatility the non-normality is exploited to improve efficiency of volatility forecasts. It is also observed that in the context of the AR(FI)MA model specification the futures and index based deseasonalized returns for the realized variance estimates improve the forecast performance. Considering the seasonality effect and the distributional properties of the estimated realized variance series, it is evident that the information content of the futures (ES) high frequency observations produces the most accurate forecasts.     

A hybrid neural network and simulated annealing approach to the unit commitment problem

In this paper, the authors present an approach combining the feedforward neural network and the simulated annealing method to solve unit commitment, a mixed integer combinatorial optimisation problem in power system. The artificial neural network is used to determine the discrete variables corresponding to the state of each unit at each time interval. The simulated annealing method is used to generate the continuous variables corresponding to the power output of each unit and the production cost. The type of neural network used in this method is a multi-layer perceptron trained by the back-propagation algorithm. A set of load profiles as inputs and the corresponding unit commitment schedules as outputs (satisfying the minimum up–down, spinning reserve and crew constraints) are utilized to train the network. A method to generate the training patterns is also presented. The experimental result demonstrates that the proposed approach can solve unit commitment in a reduced computational time with an optimum generation schedule.     

An ensemble approach of dual base learners for multi-class classification problems

In this work, we formalise and evaluate an ensemble of classifiers that is designed for the resolution of multi-class problems. To achieve a good accuracy rate, the base learners are built with pairwise coupled binary and multi-class classifiers. Moreover, to reduce the computational cost of the ensemble and to improve its performance, these classifiers are trained using a specific attribute subset. This proposal offers the opportunity to capture the advantages provided by binary decomposition methods, by attribute partitioning methods, and by cooperative characteristics associated with a combination of redundant base learners. To analyse the quality of this architecture, its performance has been tested on different domains, and the results have been compared to other well-known classification methods. This experimental evaluation indicates that our model is, in most cases, as accurate as these methods, but it is much more efficient.     

A multivariate model of fuzzy integrated logical forecasting method (M-FILF) and multiplicative time series clustering: A model of time-varying volatility for dry cargo freight market

The aim of this paper is to improve the fuzzy logical forecasting model (FILF) by utilizing multivariate inference and the partitioning problem for an exponentially distributed time series by using a multiplicative clustering approach. Fuzzy time series (FTS) is a growing study field in computer science and its superiority is indicated frequently. Since the conventional time series analysis requires various pre-conditions, the FTS framework is very useful and convenient for many problems in business practice. This paper particularly investigates pricing problems in the shipping business and price-volatility relationship is the theoretical point of the proposed approach. Both FTS and conventional time series results are comparatively presented in the final section and superiority of the proposed method is explicitly noted.     

A soft intelligent allocation-based hybrid model for uncertain complex time series forecasting

The generalization ability is one of the most important and the most influential factors for electing forecasting models, managing future events, and making decisions. In the literature, numerous hybrid models have been presented in order to improve the accuracy as well as generalization ability of single forecasting approaches. The main aim of these hybrid models is often to use more different and/or more individual models in order to capture all existing patterns and structures in the data, more completely; and consequently improving the accuracy and generalization. Although, it can be generally demonstrated that increasing the number of components will not decrease the performance of hybrid models in the training, it will not necessarily improve the generalizability, especially in complex and uncertain environments. In this paper, an efficient allocation strategy is proposed in order to assign the underlying data set to its appropriateness component for increasing generalizability as well as decreasing computational costs. In this paper, a novel soft intelligent hybrid model is developed using the allocation strategy for assign different IMFs to appropriateness certain linear, certain nonlinear, uncertain linear, and uncertain nonlinear components in decomposition based forecasting problems. The main purpose of this classification is to reduce the probability of the over-fitting problem and consequently to increase the generalization ability, in additional of deceasing the computational costs. Moreover, in this paper, an optimal weighting technique is proposed to find the relative importance of each component in order to yield the most accurate final predictions. On the other hand, the main motivation of the paper, in contrast to the regular decomposition based hybrid models in which components are blindly assigned to the models, is to develop a logical process to allocate components to the most appropriate model as well as optimally weighting them. Empirical results of crude oil prices and wind power forecasting indicate that despite of better performance of traditional parallel hybrid models in the training sample, the generalization ability of the proposed model in test sample is significantly higher than those hybrid models as well as its components in all considered benchmarks. The proposed model can averagely improve 64.86%, 61.93%, and 52.00% the accuracy of single linear, single nonlinear, and traditional hybrid non-decomposition; and 41.37%, 35.16%, and 32.63% the performance of single linear, single nonlinear, and traditional hybrid decomposition based models, respectively.