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    Neural Networks and Financial Prediction: MJ Futures

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    Anonymous 0zM5ZzZXC
    This document discusses the use of neural networks for financial prediction. It notes that while some companies claim amazing returns from neural network models, developing accurate models requires skill, experience and patience. Research has found that relatively simple neural networks using just a few key financial indicators as inputs can achieve good results in predicting market trends. Further improvements have been seen with more complex networks using larger sets of variables, though details on these high-performing models are often kept secret by companies. Neural networks show potential for applications beyond stock prediction, such as currency, futures and credit risk assessment.

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    Neural Networks and Financial Prediction: MJ Futures

    Uploaded by

    Anonymous 0zM5ZzZXC
    49 views2 pages
    This document discusses the use of neural networks for financial prediction. It notes that while some companies claim amazing returns from neural network models, developing accurate models requires skill, experience and patience. Research has found that relatively simple neural networks using just a few key financial indicators as inputs can achieve good results in predicting market trends. Further improvements have been seen with more complex networks using larger sets of variables, though details on these high-performing models are often kept secret by companies. Neural networks show potential for applications beyond stock prediction, such as currency, futures and credit risk assessment.

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    Nerural Networks

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    This document discusses the use of neural networks for financial prediction. It notes that while some companies claim amazing returns from neural network models, developing accurate models requires skill, experience and patience. Research has found that relatively simple neural networks using just a few key financial indicators as inputs can achieve good results in predicting market trends. Further improvements have been seen with more complex networks using larger sets of variables, though details on these high-performing models are often kept secret by companies. Neural networks show potential for applications beyond stock prediction, such as currency, futures and credit risk assessment.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    49 views2 pages

    Neural Networks and Financial Prediction: MJ Futures

    Uploaded by

    Anonymous 0zM5ZzZXC
    This document discusses the use of neural networks for financial prediction. It notes that while some companies claim amazing returns from neural network models, developing accurate models requires skill, experience and patience. Research has found that relatively simple neural networks using just a few key financial indicators as inputs can achieve good results in predicting market trends. Further improvements have been seen with more complex networks using larger sets of variables, though details on these high-performing models are often kept secret by companies. Neural networks show potential for applications beyond stock prediction, such as currency, futures and credit risk assessment.

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    Neural

    networks

    and

    financial

    prediction

    Neural networks have been touted as all-powerful tools in stock-market prediction.


    Companies such as MJ Futures claim amazing 199.2% returns over a 2-year period
    using their neural network prediction methods. They also claim great ease of use; as
    technical editor John Sweeney said in a 1995 issue of "Technical Analysis of Stocks
    and Commodities," "you can skip developing complex rules (and redeveloping them
    as their effectiveness fades) . . . just define the price series and indicators you want to
    use, and the neural network does the rest."
    These may be exaggerated claims, and, indeed, neural networks may be easy to use
    once the network is set up, but the setup and training of the network requires skill,
    experience, and patience. It's not all hype, though; neural networks have shown
    success at prediction of market trends.
    The idea of stock market prediction is not new, of course. Business people often
    attempt to anticipate the market by interpreting external parameters, such as economic
    indicators, public opinion, and current political climate. The question is, though, if
    neural networks can discover trends in data that humans might not notice, and
    successfully
    use
    these
    trends
    in
    their
    predictions.
    Good results have been achieved by Dean Barr and Walter Loick at LBS Capital
    Management using a relatively simple neural network with just 6 financial indicators
    as inputs. These inputs include the ADX, which indicates the average directional
    movement over the previous 18 days, the current value of the S&P 500, and the net
    change in the S&P 500 value from five days prior (see David Skapura's book
    "Building Neural Networks," p129-154, for more
    detailed information).
    This is a simple back-propagation network of three
    layers, and it is trained and tested on a high volume of
    historical market data. The challenge here is not in the
    network architecture itself, but instead in the choice of
    variables and the information used for training. I could
    not find the accuracy rates for this network, but my source claimed it achieved
    "remarkable success" (this source was a textbook, not a NN-prediction-selling
    website!).
    Even better results have been achieved with a back-propagated neural network with 2
    hidden layers and many more than 6 variables. I have not been able to find more
    details on these network architectures, however; the companies that work with them
    seem to want to keep their details secret.

    Additional Neural Network Applications in the financial world:


    o Currency prediction
    o Futures prediction
    o Bond ratings
    o Business failure prediction
    o Debt risk assessment
    o Credit approval
    o Bank theft
    o Bank failure

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