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Title: A stacked generalization system for automated FOREX portfolio trading
Authors: Petropoulos, Anastasios 
Chatzis, Sotirios P. 
Siakoulis, Vasilis 
Vlachogiannakis, Nikos 
Keywords: Forex forecasting;Algorithmic trading;Portfolio management;Machine learning;Stacked generalization
Category: Computer and Information Sciences
Field: Engineering and Technology
Issue Date: 30-Dec-2017
Source: Expert systems with applications, vol. 90, pp. 290-302
Journal: Expert systems with applications 
Abstract: Multiple FOREX time series forecasting is a hot research topic in the literature of portfolio trading. To this end, a large variety of machine learning algorithms have been examined. However, it is now widely understood that, in real-world trading settings, no single machine learning model can consistently outperform the alternatives. In this work, we examine the efficacy and the feasibility of developing a stacked generalization system, intelligently combining the predictions of diverse machine learning models. Our approach establishes a novel inferential framework that comprises the following levels of data processing: (i) We model the dependence patterns between major currency pairs via a diverse set of commonly used machine learning algorithms, namely support vector machines (SVMs), random forests (RFs), Bayesian autoregressive trees (BART), dense-layer neural networks (NNs), and naive Bayes (NB) classifiers. (ii) We generate implied signals of exchange rate fluctuation, based on the output of these models, as well as appropriate side information obtained by analyzing the correlations across currency pairs in our training datasets. (iii) We finally combine these implied signals into an aggregate predictive waveforth, by leveraging majority voting, genetic algorithm optimization, and regression weighting techniques. We thoroughly test our framework in real-world trading scenarios; we show that our system leads to significantly better trading performance than the considered benchmarks. Thus, it represents an attractive solution for financial firms and corporations that perform foreign exchange portfolio management and daily trading. Our system can be used as an integrated part in international commercial trade activities or in a quantitative investing framework for algorithmic trading and carry-trade speculation.
ISSN: 0957-4174
Rights: © 2017 Elsevier. All rights reserved.
Type: Article
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