SELECTING NEURAL NETWORK ARCHITECTURE FOR INVESTMENT PROFITABILITY PREDICTIONS

Abstract

After production and operations, finance and investments are one of the mostfrequent areas of neural network applications in business. The lack of standardizedparadigms that can determine the efficiency of certain NN architectures in a particularproblem domain is still present. The selection of NN architecture needs to take intoconsideration the type of the problem, the nature of the data in the model, as well as somestrategies based on result comparison. The paper describes previous research in that areaand suggests a forward strategy for selecting best NN algorithm and structure. Since thestrategy includes both parameter-based and variable-based testings, it can be used forselecting NN architectures as well as for extracting models. The backpropagation, radialbasis,modular, LVQ and probabilistic neural network algorithms were used on twoindependent sets: stock market and credit scoring data. The results show that neuralnetworks give better accuracy comparing to multiple regression and logistic regressionmodels. Since it is model-independant, the strategy can be used by researchers andprofessionals in other areas of application.

Keywords

• neural networks
• non-linear forward strategy
• stock market prediction
• credit scoring