The Journal of Information Systems (한국정보시스템학회지:정보시스템연구)

Korea Association of Information Systems (한국정보시스템학회)
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A Study to Improve the Return of Stock Investment Using Genetic Algorithm

유전자 알고리즘을 이용한 주식투자 수익률 향상에 관한 연구

  • Cho He Youn (University of Ulsan, School of Business and Administration) ;
  • Kim Young Min (University of Ulsan, School of Business and Administration)
  • 조희연 (울산대학교 경영대학 경영학부) ;
  • 김영민 (울산대학교 대학원 경영학)
  • Published : 2003.12.01
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Abstract

This paper deals with the application of the genetic algorithm to the technical trading rule of the stock market. MACD(Moving Average Convergence & Divergence) and the Stochastic techniques are widely used technical trading rules in the financial markets. But, it is necessary to determine the parameters of these trading rules in order to use the trading rules. We use the genetic algorithm to obtain the appropriate values of the parameters. We use the daily KOSPI data of eight years during January 1995 and October 2002 as the experimental data. We divide the total experimental period into learning period and testing period. The genetic algorithm determines the values of parameters for the trading rules during the teaming period and we test the performance of the algorithm during the testing period with the determined parameters. Also, we compare the return of the genetic algorithm with the returns of buy-hold strategy and risk-free asset. From the experiment, we can see that the genetic algorithm outperforms the other strategies. Thus, we can conclude that genetic algorithm can be used successfully to the technical trading rule.

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