Pattern sets for financial prediction: A follow-up
Paper in proceedings, 2018
As a follow-up to an earlier investigation, a true forward test has been carried out by applying a previously developed financial predictor (in the form of a so called pattern set, optimized using an evolutionary algorithm) to a new data set, involving data for 200 stocks and covering a time period from February 2016 to the end of that year. Despite being applied to previously unseen data, the pattern set generated a set of trades with an average one-day return of 0.394%. Moreover, the pattern set’s total trading return (excluding transaction costs) over the entire period covered by the new data, when applied as a trading strategy with a simple m–day holding period for each trade, was 15.9% for m = 1, 24.9% for m = 3, and 61.6% for m = 6, compared to 16.2% for the benchmark index (S & P 500) over the same period.