Tinkering with Genetic Algorithms: Forecasting and Data Mining in Finance and Economics

In two previous papers [13,14] genetic algorithms were presented that permit the search for dependencies among sets of data (univariate or multivariate time-series, or cross-sectional observations) . These algorithms — modeled after genetic theories and Darwinian concepts, such as natural selection and survival of the fittest — permit the discovery of equations, in symbolic form, that re-create or, at least, mimic the data-generating process. This paper discusses some of the computational issues and difficulties that may arise when the genetic algorithm is applied, and suggests ways to improve the algorithm’s performance.

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