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Applied Rough Set Logics for Multi-Criteria Decision Analysis in Stock Index Volatility Projection

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  • Wen-Rong Jerry Ho

    (Department of Banking & Finance, Chinese Culture University, 55, Hwa-Kang Road, Yang-Ming-Shan, Taipei 111, Taiwan)

Abstract

The main purpose of this paper is to advocate a rule-based forecasting technique for anticipating stock index volatility. This paper intends to set up a stock index indicators projection prototype by using a multiple criteria decision making model consisting of the cluster analysis (CA) technique and Rough Set Theory (RST) to select the important attributes and forecast TSEC Capitalization Weighted Stock Index. The projection prototype was then released to forecast the stock index in the first half of 2009 with an accuracy of 66.67%. The results point out that the decision rules were authenticated to employ in forecasting the stock index volatility appropriately.

Suggested Citation

  • Wen-Rong Jerry Ho, 2011. "Applied Rough Set Logics for Multi-Criteria Decision Analysis in Stock Index Volatility Projection," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 715-735.
    • Handle: RePEc:wsi:rpbfmp:v:14:y:2011:i:04:n:s0219091511002378
    DOI: 10.1142/S0219091511002378
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    More about this item

    Keywords

    Stock index volatility; cluster analysis (CA); rough set theory (RST); multiple criteria decision making (MCDM);
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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