Input data reduction for the prediction of financial time series

Prediction of financial time series using artificial neural networks has been the subject of many publications, even if the predictability of financial series remains a subject of scientific debate in the financial literature. Facing this difficulty, analysts often consider a large number of exogenous indicators, which makes the fitting of neural networks extremely difficult. In this paper, we analyze how to aggregate a large number of indicators in a smaller number using -possibly nonlinear- projection methods. Nonlinear projection methods are shown to be equivalent to the linear Principal Component Analysis when the prediction tool used on the new variables is linear. The methodology developed in the paper is validated on data from the BEL20 market index.

• Type: Conference
• Year: 2001
• Where: ESANN
• Authors: Amaury Lendasse, John Aldo Lee, Eric de Bodt, Vincent Wertz, Michel Verleysen
• Keywords: ESANN 2001, ESANN 2007, Large Number, Neural Networks, Projection Methods