Using extended classifier system for portfolio allocation of MSCI index component stocks

Wen Chih Tsai*, Chiung Fen Huang, An-Pin Chen

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

In a recent study, Lin[11] proposed the LCS for short-term stock forecast. Gershoff[13] proposed the extended Classifier system(XCS) agent to model different traders by supplying different input information. Announcement made by Morgan Stanley Capital Investment (MSCI) regarding the additions, removals, and even the weights of the component stocks in its country indices every quarter generally would cause changes to the prices and/or trade volumes of the associated component stocks. This paper takes an XCS in artificial intelligence to dynamically learn and adapt to the changes to the component stocks in order to optimize portfolio allocation of the component stocks. Since these price trends of MSCI component stocks are influenced by unknown and unpredictable surroundings, using XCS to model the fluctuations on financial market allows for the capability to discover the patterns of future trends. This simulation work on the basis of the changes to 121 component stocks in the MSCI Taiwan index between 1998 and 2009 suggests the XCS can produce the great profit and optimize portfolio allocation.

Original languageEnglish
Title of host publicationNCM 2009 - 5th International Joint Conference on INC, IMS, and IDC
Pages1019-1024
Number of pages6
DOIs
StatePublished - 1 Dec 2009
EventNCM 2009 - 5th International Joint Conference on Int. Conf. on Networked Computing, Int. Conf. on Advanced Information Management and Service, and Int. Conf. on Digital Content, Multimedia Technology and its Applications - Seoul, Korea, Republic of
Duration: 25 Aug 200927 Aug 2009

Publication series

NameNCM 2009 - 5th International Joint Conference on INC, IMS, and IDC

Conference

ConferenceNCM 2009 - 5th International Joint Conference on Int. Conf. on Networked Computing, Int. Conf. on Advanced Information Management and Service, and Int. Conf. on Digital Content, Multimedia Technology and its Applications
CountryKorea, Republic of
CitySeoul
Period25/08/0927/08/09

Keywords

  • Component; financial forecasting
  • MSCI Taiwan index component stock
  • Reinforcement learning
  • XCS

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