Investment Decision Support Based on Interval Type-2 Fuzzy Expert System
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Date
2021-04-29
Authors
Janková, Zuzana
Jana, Dipak Kumar
Dostál, Petr
0000-0003-1798-5275Advisor
Referee
Mark
Journal Title
Journal ISSN
Volume Title
Publisher
Kaunas University of Technology
Altmetrics
Abstract
The decision-making process on investing in financial markets is a very complex and difficult task, mainly due to the chaotic behavior and high uncertainty in the development of the prices of investment instruments. For this reason, financial markets are increasingly using means of artificial intelligence, namely fuzzy logic, which is able to capture the nonlinear behavior.Fuzzy logic provides a way to draw definitive conclusions from vague, ambiguous, or inaccurate information.However, there are some drawbacks associated with type-1 fuzzy logic, so the type-2 fuzzy logic comes forward, which can work with greater uncertainty. Type-2 fuzzy logic works with a new third dimension fuzzy set that provides additional degrees of freedom and allows to model and process numerical and linguistic uncertainties directly. The paper applies type-2 fuzzy logic to the stock market with the aim to create a simple and understandable model for deciding on investing in investment instruments, which is important for investors in this area. The proposed type-2 fuzzy model uses return, risk, dividend and total expense ratio of ETF as input variables. The created system is able to generate aggregated models from a certain number of language rules, which allows the investor to understand the created financial model. Using type-2 fuzzy logic can lead to more realistic and accurate results than type-1 fuzzy logic.
Description
Citation
Engineering Economics. 2021, vol. 32, issue 2, p. 118-129.
https://inzeko.ktu.lt/index.php/EE/article/view/24884
https://inzeko.ktu.lt/index.php/EE/article/view/24884
Document type
Peer-reviewed
Document version
Published version
Date of access to the full text
Language of document
en