Genetic Modeling The Stock Market

Posted on Fr 19 September 2008 in misc • 2 min read

  • Economy
  • Genetic Algorithms
  • Neural Nets
  • Trends tags:
  • Economy
  • Genetic Algorithms
  • Neural Nets meta: _edit_last: '5' _aioseop_keywords: Genetic Algorithms, Neural Nets, Rapidminer, Howto, FAQ, tips, Market, Stock Market, Models dsq_thread_id: '182437983' author:

    The one nice thing about Genetic Algorithmic stock market models is that they evolve with new market data. The bad thing about them is that they're a pain in the ass to create.  My current GA model is surprisingly simple and works in conjunction with my S&P500 Volatility Timing Model.

    Although its highly secret, what I can tell you is that I use the Genetik Solver Excel Addin.  I specifically use it because its free and integrates with MS Excel.  Its a bit clunky to use but if you read my tutorial on it, you should be able to learn it in no time.

    I take a snapshot of market data in real time using the input variables from my volatility model and use the Genetik Solver to analyze those data points.  I make sure to grab the max and min data points for each variable, load it into the Solver, enter my population size, cross over probability, mutation, and then run it.

    The answers I get from running this analysis helps me understand at what levels my input variables (to the timing model) should rise or fall to for things to return to a state of calm.  From this I can better understand the current market internals and  what things to look for as the market evolves in real time.

    Right now my Genetic Algorithmic stock market model tells me that in order for the markets to return to a calmer state,  Gold has to drop (no-brainer) and T-bills have to increase in yield to the 2% level.  What wasn't so obvious was that fact the technology sector must remain fairly flat and the Nikkei 225 has to rally like crazy.  If Gold sits tight, T-Bill yields weaken, and you have a rally in the tech sector, watch out!  At least for for this week.