On Developing and Performance Evaluation of Adaptive Second Order Neural Network With GA-Based Training (ASONN-GA) for Financial Time Series Prediction

Abstract

Financial time series forecasting has been regarded as a challenging issue because of successful prediction could yield significant profit, hence require an efficient prediction system. Conventional ANN based models are not competent systems. Higher order neural networks have several advantages over traditional neural networks such as stronger approximation, higher fault tolerance capacity and faster convergence. With the aim of achieving improved forecasting accuracy, this article develops and evaluates the performance of an adaptive single layer second order neural network with GA based training (ASONN-GA). The global search ability of GA has been incorporated with the better generalization ability of a second order neural network and the model is found quite capable in handling the uncertainties and nonlinearities associated with the financial time series. The model takes minimal input data and considered the partially optimized weight set from previous training, hence a significant reduction in training time. The efficiency of the model has been evaluated by forecasting one-step-ahead closing prices and exchange rates of five real stock markets and it is revealed that the ASONN-GA model achieves better forecasting accuracy over other state of the art models.