An Evolutionary Approach in Financial Forecasting

30 Pages Posted: 29 May 2011

See all articles by Nhat Le

Nhat Le

Vietnam National University of Ho Chi Minh City - School of Economics and Laws

Date Written: May 26, 2011

Abstract

We develop an adaptive learning game to rethink efficient markets. We use the stochastically stable state of this game, which is a mixed Nash equilibrium, to form an adaptive expectation model that provides an estimate of the confidence interval for prices on the next day. The estimate is most accurate in the time of bubbles and crises, when rational expectations no longer fully hold.

Keywords: Rational Expectation, Volatility, Adaptive Learning, Price Forecast

JEL Classification: C22, C73, G12, G14, G17

Suggested Citation

Le, Nhat, An Evolutionary Approach in Financial Forecasting (May 26, 2011). Available at SSRN: https://ssrn.com/abstract=1853046 or http://dx.doi.org/10.2139/ssrn.1853046

Nhat Le (Contact Author)

Vietnam National University of Ho Chi Minh City - School of Economics and Laws ( email )

Ho Chi Minh
Vietnam

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