Modeling International Short-Term Capital Flow with Genetic Programming
Shu‐Heng Chen, Tzu-Wen Kuo · 2003
In this paper, a non-deterministic (portfolio-based) finite-state automaton is proposed to generalize the current financial trading applications of genetic pro-gramming from single risky asset to multi risky as-sets. The GP-evolved trading rules are tested un-der various settings with respect to search intensity, genetic portfolios, and validating parameters. The rules are compared with performance of a buy-and-hold strategy in a context of international capital flow using data from Taiwan, the U.S., Hong Kong, Japan and the U.K. The GP are evaluated by using both the mean rule and the majority rule. However, by and large, it is found that GP was outperformed by the buy-and-hold strategy in both cases.