Authors: Abdalla Kablan, Wing Lon Ng
Addresses: Centre for Computational Finance and Economic Agents (CCFEA), University of Essex, Wivenhoe Park, Colchester, CO4 3SQ, UK. ' Centre for Computational Finance and Economic Agents (CCFEA), University of Essex, Wivenhoe Park, Colchester, CO4 3SQ, UK
Abstract: This paper introduces an adaptive neuro-fuzzy inference system (ANFIS) for financial trading, which learns to predict price movements from training data consisting of intraday tick data sampled at high frequency. The empirical data used in our investigation are five-minute mid-price time series from FX markets. The ANFIS optimisation involves back-testing as well as varying the number of epochs, and is combined with a new method of capturing volatility using an event-driven approach that takes into consideration directional changes within pre-specified thresholds. The results show that the proposed model outperforms standard strategies such as buy-and-hold or linear forecasting.
Keywords: high-frequency finance; trading; adaptive neuro-fuzzy inference systems; ANFIS; foreign exchange markets; intraday seasonality; fuzzy logic; volatility.
International Journal of Financial Markets and Derivatives, 2011 Vol.2 No.1/2, pp.68 - 87
Published online: 10 Feb 2011 *Full-text access for editors Access for subscribers Purchase this article Comment on this article