Using Genetic Algorithms to Tnd Technical Trading Rules

Journal of Financial Economics 51 (1999) 245271 Using patrimonial algorithms to ?nd good trading rules Franklin Allen *, Risto Karjalainen The Wharton School, University of Pennsylvania, Philadelphia, PA 19104, USA Merrill hide & Co., Inc., Mercury Asset Management, 33 King William Street, London, EC4R 9AS, UK Received 12 October 1995; received in revised form 7 April 1998 kidnap We use a genetic algorithm to l place ahead technical trading rules for the S&P euchre index utilise daily prices from 1928 to 1995. After transaction costs, the rules do not earn consistent excess returns over a simple buy-and-hold dodge in the out-of-sample test periods. The rules argon adapted to identify periods to be in the index when daily returns are positive and volatility is low and out when the reverse is true. These latter(prenominal) results can by and large be explained by low-order concomitant correlation in transmission line index returns. 1999 Elsevier cognition S.A. All rights reserved. JEL classi?cation: C61; G11; G14 Keywords: Trading rules; inherited algorithms; lavishness returns 1. Introduction Genetic algorithms belong to a class of machine learning algorithms that hurt been success overflowingy used in a number of explore areas. There is a growing interest * interchangeable author. Tel.

: 215 898 3628; telefax: 215 573 2207; e-mail: allenf@wharton.upenn.edu.  Helpful comments were made by crack Dunsby, Lawrence Fisher, Steven Kimbrough, capital of Minnesota Kleindorfer, Michele Kreisler, James Laing, Josef Lakonishok, George Mailath, and seminar participants a t Institutional Investor, J.P. Morgan, the N! BER Asset determine Program, Ohio tell University, Purdue University, the Santa Fe Institute, Rutgers University, Stanford University, University of California, Berkeley, University of Michigan, University of Pennsylvania, University of Utah, Washington University (St. Louis), and the 1995 AFA Meetings in Washington, D.C. We are in busy grateful to Kenneth R. French (the referee), and G. William Schwert (the editor) for their...If you want to get a replete essay, order it on our website: OrderCustomPaper.com

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