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Forecasting Daily Foreign Exchange Rates Using Genetically Optimized Neural Networks

Listed author(s):
  • Nag, Ashok K
  • Mitra, Amit
Registered author(s):

    Forecasting currency exchange rates is an important financial problem that has received much attention especially because of its intrinsic difficulty and practical applications. The statistical distribution of foreign exchange rates and their linear unpredictability are recurrent themes in the literature of international finance. Failure of various structural econometric models and models based on linear time series techniques to deliver superior forecasts to the simplest of all models, the simple random walk model, have prompted researchers to use various non-linear techniques. A number of non-linear time series models have been proposed in the recent past for obtaining accurate prediction results, in an attempt to ameliorate the performance of simple random walk models. In this paper, we use a hybrid artificial intelligence method, based on neural network and genetic algorithm for modelling daily foreign exchange rates. A detailed comparison of the proposed method with non-linear statistical models is also performed. The results indicate superior performance of the proposed method as compared to the traditional non-linear time series techniques and also fixed-geometry neural network models. Copyright © 2002 by John Wiley & Sons, Ltd.

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    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

    Volume (Year): 21 (2002)
    Issue (Month): 7 (November)
    Pages: 501-511

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    Handle: RePEc:jof:jforec:v:21:y:2002:i:7:p:501-11
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