Modeling Expectations with GENEFER -- an Artificial Intelligence Approach
AbstractEconomic modeling of financial markets attempts to model highly complex systems in which expectations can be among the dominant driving forces. It is necessary, then, to focus on how agents form expectations. We believe that they look for patterns, hypothesize, try, make mistakes, learn and adapt. Agents' bounded rationality leads us to a rule-based approach which we model using Fuzzy Rule Bases. For example if a single agent believes the exchange rate is determined by a set of possible inputs and is asked to state his relationship, his answer will probably reveal a fuzzy nature like: IF the inflation rate in the EURO-Zone is low and the GDP growth rate is larger than in the US THEN the EURO will rise against the USD. Low and larger are fuzzy terms which give a gradual linguistic meaning to crisp intervalls in the respective universes of discourse. In order to learn a Fuzzy Rule base from examples we introduce Genetic Algorithms and Artificial Neural Networks as learning operators. These examples can either be empirical data or originate from an economic simulation model. The software GENEFER (GEnetic NEural Fuzzy ExploreR) has been developed for designing such a Fuzzy Rule Base. The design process is modular and comprises Input Identification, Fuzzification, Rule Base Generating and Rule Base Tuning. The two latter steps make use of genetic and neural learning algorithms for optimizing the Fuzzy Rule Base.
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Bibliographic InfoArticle provided by Society for Computational Economics in its journal Computational Economics.
Volume (Year): 21 (2003)
Issue (Month): 1_2 (02)
Other versions of this item:
- Eric Ringhut & Stefan Kooths, 2003. "Modeling Expectations with GENEFER – an Artificial Intelligence Approach," Computational Economics, Society for Computational Economics, vol. 21(1), pages 173-194, February.
- Stefan Kooths & Eric Ringhut, 2000. "Modelling Expectations With Genefer- An Artificial Intelligence Approach," Computing in Economics and Finance 2000 80, Society for Computational Economics.
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