THE quest for alpha : can artificial neural networks help?
The application of artificial neural networks (ANN) in finance is relatively new area of research. We employed ANNs that used both fundamental and technical inputs to predict future prices of widely held Australian stocks and used these predicted prices for stock portfolio selection over a 10-year period (2001-2011). We found that the ANNs generally do well in predicting the direction of stock price movements. The stock portfolios selected by the ANNs with median accuracy are able to generate positive alpha over the 10-year period. More importantly, we found that a portfolio based on randomly selected network configuration had zero chance of resulting in a significantly negative alpha but a 27% chance of yielding a significantly positive alpha. This is in stark contrast to the findings of the research on mutual fund performance where active fund managers with negative alphas outnumber those with positive alphas.
Impact and interest:
Citation counts are sourced monthly from and citation databases.
These databases contain citations from different subsets of available publications and different time periods and thus the citation count from each is usually different. Some works are not in either database and no count is displayed. Scopus includes citations from articles published in 1996 onwards, and Web of Science® generally from 1980 onwards.
Citations counts from theindexing service can be viewed at the linked Google Scholar™ search.
Full-text downloads displays the total number of times this work’s files (e.g., a PDF) have been downloaded from QUT ePrints as well as the number of downloads in the previous 365 days. The count includes downloads for all files if a work has more than one.
|Item Type:||Journal Article|
|Subjects:||Australian and New Zealand Standard Research Classification > INFORMATION AND COMPUTING SCIENCES (080000) > ARTIFICIAL INTELLIGENCE AND IMAGE PROCESSING (080100) > Neural Evolutionary and Fuzzy Computation (080108)
Australian and New Zealand Standard Research Classification > INFORMATION AND COMPUTING SCIENCES (080000) > ARTIFICIAL INTELLIGENCE AND IMAGE PROCESSING (080100) > Simulation and Modelling (080110)
Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Financial Economics (140207)
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School|
|Copyright Owner:||Copyright 2014 Finsia|
|Deposited On:||10 Apr 2014 23:17|
|Last Modified:||11 Oct 2014 03:33|
Repository Staff Only: item control page