Expert Systems with Applications 40 (2013) 60556063

Contents lists available at SciVerse ScienceDirect

Expert Systems with Applications

journal homepage: www.elsevier.com/locate/eswa

An adaptive network-based fuzzy inference system (ANFIS)

for the forecasting: The case of close price indices
Ilija Svalina , Vjekoslav Galzina 1, Roberto Lujic 1, Goran imunovic 2
Mechanical Engineering Faculty in Slavonski Brod, Trg I. B. Mazuranic 2, 35000 Slavonski Brod, Croatia

a r t i c l e i n f o a b s t r a c t

Keywords: The close price prediction model of the Zagreb Stock Exchange Crobex index is presented in this paper.
The Zagreb Stock Exchange Crobex index For the input/output data plan modeling the Crobex index close price historical data are retrieved from
close price the Zagreb Stock Exchange ofcial internet pages. The prediction model is created in the way that for each
Adaptive neuro-fuzzy inference system of 5 days in advance it predicts the Crobex close price. The prediction model is generated based on the
(ANFIS)
input/output data plan by means of the adaptive neuro-fuzzy inference system method, representing the
Fuzzy inference system (FIS)
Neural networks (NNs)
fuzzy inference system. It is of the essence to point out that for each day a separate fuzzy inference sys-
tem is created by means of the adaptive neuro-fuzzy inference system method based on the same set of
input/output data, the only difference being that for every separate fuzzy inference system different sub-
sets for training and checking are used so that input variables are differently created. The input/output
data set represents the historical data of the Crobex index close price from 4 November 2010 to 24
January 2012 and the Crobex index close price is predicted for the subsequent 5 days, the rst day of
prediction being 25 January 2012. After that the above mentioned input/output data set is shifted 5 days
in advance and the Crobex index close price is predicted in advance for the next 5 days starting with the
last day of the input/output data set. In that way the Crobex index close prices are predicted until 19
October 2012 based on the Crobex index close price historical data. At the end of the paper qualitative
and quantitative estimates are presented for the given approach of predicting the Crobex index close
price showing that the approach is useful for predicting within its limits.
2013 Elsevier Ltd. All rights reserved.

1. Introduction prediction of price movements on the Taiwan stock exchange. For

Some investors, nancial analysts and stock ownership manag-
ers try to predict the stock exchange movements. They base their
predictions on their own professional experience or use various
tools for the share market analysis. Their aim is to predict the share
market movements as precisely as possible as that is how more
prot is made.
From the literature survey the following can be seen: In paper
(Liang-Ying, Tai-Liang, & Tien-Hwa, 2011) the authors point out
two main drawbacks in the latest models: (1) prognostic models
based on articial intelligence (AI) algorithms, such as neural net-
works (NNs) and genetic algorithms (GAs), give complicated and
complex rules and (2) statistical forecasting models such as time
series require some basic knowledge on variables and design of
forecasting models on the basis of mathematical equations that
stock holders cannot easily understand. So as to neutralize the men-
tioned drawbacks the authors suggest a model based on ANFIS for
Corresponding author. Tel.: +385 35 493 455; fax: +385 35 446 446.
E-mail addresses: isvalina@sfsb.hr (I. Svalina), vgalzina@sfsb.hr (V. Galzina),
rlujic@sfsb.hr (R. Lujic), gsimun@sfsb.hr (G. imunovic).
1
Tel.: +385 35 493 431; fax: +385 35 446 446.
2
Tel.: +385 35 493 454; fax: +385 35 446 446.
the same reason the authors of paper (Jing-Rong, Liang-Ying, &
Ching-Hsue, 2011) suggest a hybrid ANFIS model on the basis of
AR (Autoregression model) and the volatility for the Taiwan stock
exchange index TAIEX prediction problem. Different from the sys-
tem of modeling based on conventional mathematical tools not
well adapted for solving poorly dened and insecure systems, by
using if-then fuzzy rules the fuzzy inference system can model hu-
man knowledge and inference processes without the application of
precise quantitative analyses (Casiano & Mora, 2002). There are
numerous practical applications of fuzzy modeling in control, pre-
diction and inference. Nevertheless, there are some viewpoints in
fuzzy modeling that need explanation: (1) there are no standard
methods for transferring human knowledge or experience to the
basis of the fuzzy inference system fuzzy rules and (2) there is a
need for efcient methods for the membership functions tuning
in order to reduce the limit of output error. In paper (Melin, Soto,
Castillo, & Soria, 2012) the authors propose new architecture for
ANFIS ensembles or they simplify the ANFIS ensembles which can
serve as a basis for constructing a set of if-then fuzzy rules with
the corresponding membership functions. In this paper the results
of simulations are shown in which the ANFIS ensembles are used
for predicting chaotic time series for Dow Jones Indexes (2010),

0957-4174/$ - see front matter 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.eswa.2013.05.029
6056 I. Svalina et al. / Expert Systems with Applications 40 (2013) 60556063
Mexican stock exchange (2010) and the results for each ANFIS are
evaluated by the Root Square Mean Error method (RSME). Due to
the poorer approximation of previous models, trading costs can in-
crease, e.g. commission charges in successive buying and selling as
a result of unimportant alarms and other bad forecasts of price
trends which do not meet the dealers expectations and can become
non-refundable, so the authors in paper (Esfahanipour & Aghamiri,
2010) developed the neuro fuzzy inference system adapted to the
TakagiSugenoKang (TSK) kind of fuzzy rules for close price pre-
diction. The proposed model was tested on the Teheran Stock Ex-
change Indexes (TEPIX). In paper (Boyacioglu & Avci, 2010) the
authors investigate the stock exchange earning predictability using
ANFIS. The aim was to nd out if the ANFIS algorithm was suitable
for accurate prediction of earning per share. Six variables are used
as input and three indices were used as output. The experimental
data showed that the ANFIS algorithm based model was successful
in forecasting monthly earnings by predicting stock prices of the
Istanbul Stock Exchange (ISE) index. In paper (Alizadeh, Rada, Jolai,
& Fotoohi, 2011) the authors suggest to use ANFIS for predicting
earnings on stock portfolio. They show that the forecast portfolio
earnings can be improved by taking various technical and basic
attributes of different stock exchange indices as ANFIS inputs. The
neuro-fuzzy model is tested on the Teheran Stock Exchange portfo-
lios. Experimental data show that the proposed methods predict the
portfolio earnings better than the classical Markowitz portfolio
optimization method, multiple regression, neural networks and
the SugenoYasukawa method. In paper (Alizadeh, Jolai, Aminnay-
eri, & Rada, 2012) the authors analyze the performances of ve ba-
sic and widely used input selection algorithms to determine the
most relevant input variables, including both model-free methods
and model-based methods. At the end they compare the perfor-
mances of those algorithms by applying them to the stock price pre-
diction problem. The experimental data pointed to the advantages
and disadvantages of those ve input selection algorithms. The
WASP (Wave Analysis Stock Prediction) system based on neuro-
fuzzy architecture is presented in paper (Atsalakis, Dimitrakakis,
& Zopounidis, 2011). The WASP system is used to predict stock
prices and is tested on the stock of the National Bank of Greece.
The obtained results are encouraging. The authors of paper (Atsala-
kis & Valavanis, 2009) present the methodology based on ANFIS to
predict short-term stock movements. The Athens and the New York
Stock Exchange (NYSE) data are used for the proposed model train-
ing and evaluation. The proposed system is compared with the buy
and hold strategy and several other methods and is shown to be far
more superior. In paper (Hsieh, Hsiao, & Yeh, 2011) the authors
present the integrated system where wavelet transforms and recur-
rent neural network (RNN) based on articial bee colony (ABC)
algorithm (called ABCRNN) are combined for stock price forecast-
ing. This integrated system is tested on several international stock
exchanges, Dow Jones Industrial Average Index (DJIA), London
FTSE-100 Index (FTSE), Tokyo Nikkei-225 Index (Nikkei), and Tai-
wan Stock Exchange Capitalization Weighted Stock Index (TAIEX).
The proposed system gives quite promising results and it also has
a feature for predicting stock prices and maximizing prot in the
trading system real time. In paper (Cheng, Wei, & Chen, 2009) the
authors suggest a new model based on multi-stock volatility cau-
sality, a fusion adaptive-network-based fuzzy inference system
(ANFIS) procedure, for the problem of predicting stock price in Tai-
wan. Three practical, obtained data sets for stock indices of Ameri-
can and Taiwan stock exchanges were used in the empirical
experiment. The experimental data show that the suggested model
is superior to Yus model and Chens model with regard to the root
mean square error and the realized prot. A possible prot making
trade strategy based on predicting stock prices using genetic
programming is proposed in paper by Kaboudan (2000). Genetic
programming evolves regression models that give reasonable
predictions 1 day in advance. This limitation stipulated the devel-
opment of 1 day trade strategy based on the genetic programming
obtained prediction of the lowest and highest stock prices. In paper
(Zhai, Wen, Yang, & Song, 2010) the authors investigate whether
the hybrid approach, by combining different approaches of stock
prediction, can considerably surpass any individual approach. Per-
formances of different hybrid approaches are compared. In the hy-
brid approach three well investigated approaches are combined:
back propagation neural network (BPNN), adaptive network-based
fuzzy neural inference system (ANFIS) and support vector machine
(SYM). Experimental data show that by combining individual algo-
rithms better performances can be obtained than by individual ap-
proach of any single algorithm. Paper (Cheng & Quek, 2007)
analyzes the use of ANFIS in predicting the possible action day of
investors business moves (buying or selling) and the possible busi-
ness moves of investors on that day. The results showed that the
model relatively better predicted the investors action day than
their concrete moves. A number of methods used for predicting dai-
ly stock prices are presented in paper by Afolabi and Olude (2007).
These methods are backpropagation, Kohonen SOM, and a hybrid
Kohonen SOM. According to the results the least error is obtained
by the hybrid Kohonen SOM method. In paper (Olatunji, Al-Ahmadi,
Elshafei, & Fallatah, 2011) the authors propose a model based on
articial neural networks for prediction of Saudi Stock market.
The proposed model is based mostly on the Saudi Stock market his-
torical data for a large time period. The obtained results show that
the proposed ANN model predicts the next day close price with a
low average error and a high correlation coefcient. The authors
in paper (Ansari, Kumar, Shukla, & Tiwari, 2010) provide a state-
of-art for Adaptive Neural-Fuzzy Network (ANFN) application to
forecast stock market index and involved market uncertainties by
combining the econometrical test to optimize the ANFIS and FIS
function. All the tests and analyses are studied on NASDAQ Stock
Market for the years 2008 and 2009. In paper (Kim & Lee, 2004) a
feature transformation method is compared with two conventional
methods for natural neural networks by means of genetic algorithm
(GA). Three feature transformation methods are compared and the
results obtained by the feature transformation method using genet-
ic algorithm show better performances with regard to the other two
methods. Based on the principles of technical analysis, in paper
(Tan, Quek, & Cheng, 2011) the authors propose a model of articial
intelligence which employs the adaptive network fuzzy inference
system (ANFIS) supplemented by the use of reinforcement learning
(RL). The results show that the proposed model is a powerful and
valuable tool in stock investment decisions.
2. The problem denition and the goal of investigation
In order to make prot it is very important to predict stock mar-
ket movements as precisely as possible. Various indices are used as
indicators of a market. At the Zagreb Stock Exchange several indi-
ces such as Crobex and Crobex10 are calculated and published
daily. Index is an indicator of value of a given number of stocks
in its composition and it is used to monitor the success of a market
or a sector. Therefore, for a market or a sector the index is an
indicator of the stock up trends or down trends. Because of the
mentioned reasons it has been decided to make a model for pre-
dicting the index value on the basis of several days. The Crobex
index is selected as it is composed of several different stocks which
show it as a more robust indicator of trends on the Zagreb Stock
Exchange.
The Zagreb Stock Exchange Crobex close price index is chosen
as the prediction model output. For the input/output data plan the
Crobex index historical data are used available at the Zagreb Stock
Exchange ofcial website. The prediction model is created in the
way that for each of the ve days, in advance, it predicts the
 I. Svalina et al. / Expert Systems with Applications 40 (2013) 60556063
Fig. 1. Scheme of the prediction model.
Crobex index close price. In addition to that, historical time period
is simulated where the rst input/output data set is composed of
the Crobex index close price data in the time period from 4
November 2010 to 24 January 2012. Based on the rst set of in-
put/output data the prediction model is generated by means of
an adaptive neuro-fuzzy inference system method representing
the fuzzy inference system. The model is created so as to generate
a separate fuzzy inference system for each of the 5 days based on
the same set of input/output data of which 80% are used for train-
ing and 20% for the fuzzy inference system checking. The data for
the training and the checking subsets are chosen at a random basis,
the pattern of the subsets being different for each of the predicted
days. The Average relative error and the Average coefcient of
variation of root mean square error are then used to introduce
the performances of each of the fuzzy inference systems on a given
prediction day. The already mentioned various training and check-
ing subsets and the different choice of input variables are what
makes a difference between the generated training and checking
subsets by prediction days.
6057
After that the input/output data set changes by being moved
5 days in advance. The above mentioned activities are then re-
peated. It is crucial to point out that the input/output data set shift-
ing occurs 38 times and the last datum in the 38th set of the input/
output data is the Crobex close price on 19 October 2012. Fig. 1
depicts the scheme of the complete prediction model.
The input/output data plan concerning prediction days is cre-
ated based on the Crobex index close price as shown in Table 1.
It can be seen that the input/output data plan has got three inputs
and one output.
The inputs are differently created for every prediction day and
are marked with Closep and the day on which the observed Cro-
bex index close price is realized considering the time t which
marks the day of the last known close price.
For each of the fuzzy inference systems on the current predic-
tion day, input variables are selected based on multiple correla-
tions. Fig. 2 illustrates the correlations between the rst and the
second input and the corresponding output for the ve prediction
days.
6058 I. Svalina et al. / Expert Systems with Applications 40 (2013) 60556063

Table 1
Input/output data plan.

Input 1 Input 2 Input 3 Output

First prediction day Closep(t1) Closep(t2) Closep(t1) Closep(t) Closep(t + 1)
Second prediction day Closep(t2) Closep(t1) Closep(t) Closep(t + 2)
Third prediction day Closep(t3) Closep(t1) Closep(t) Closep(t + 3)
Fourth prediction day Closep(t4) Closep(t1) Closep(t) Closep(t + 4)
Fifth prediction day Closep(t5) Closep(t1) Closep(t) Closep(t + 5)

Fig. 2. Correlations between the rst and the second input and the corresponding output for all ve prediction days.

3. Adaptive neuro-fuzzy inference system (ANFIS) 3.2. Fuzzy system

3.1. Fuzzy logic
In 1965 paper L.A. Zadeh proposed fuzzy logic as an alternative
way for conveying data. Fuzzy logic or foggy logic is the logic
that serves for describing unreliable data or knowledge. The main
difference between the fuzzy and the classical logic refers to the
data membership in a set. While in the fuzzy logic data can be-
long to more than one set in the classical logic they either belong
or do not belong to some set. One of the greatest advantages of
fuzzy logic is the use of linguistic variables that can be easily
understood. Traditional two-valued logic or often called binary lo-
gic can be considered as a subset of fuzzy logic. Fuzzy logic is
used in many problems in which data and/or knowledge need
not be precise.
A fuzzy system is any static or dynamic system that uses fuzzy
logic and a corresponding mathematical environment (theory of
fuzzy sets, fuzzy rules and fuzzy inference or fuzzy reasoning).
Basically, the fuzzy inference systems include three components:
basis of fuzzy rules, data base of membership functions and rea-
soning mechanism. Fuzzy reasoning is the process of mapping
from the given inputs to the outputs by means of fuzzy logic.
There are three main kinds of fuzzy systems, the difference be-
tween them being in the way of calculating the output:
1. Mamdani system (gives a fuzzy output that has to be
defuzzied).
2. Sugeno system (uses the function that gives a real number as
output).
 I. Svalina et al. / Expert Systems with Applications 40 (2013) 60556063 6059

Fig. 3. General architecture of ANFIS.

3. Tsukamoto system (similar to Sugeno system but uses monoto-
nous functions).
The main disadvantage of fuzzy systems is that the knowledge
about a problem must be known in advance for a qualitative fuzzy
inference system to be dened.
3.3. Neuro-fuzzy system
The disadvantages of fuzzy inference systems (expert knowl-
edge about a problem has to be known in advance) and neural net-
works (giving complicated rules hard to understand) are the reason
why the neural fuzzy systems appeared, retaining the advantages
of both methods and outweighing the disadvantages. The lack of
fuzzy inference systems is solved by creating the knowledge about
a problem from the neural inference system training data while the
complicated and hard to understand rules of neural networks are
bypassed by using linguistic variables by means of which results
are easily explained.
A well-known neural-fuzzy system is the adaptive neuro-fuzzy
inference system (ANFIS) used in solving various problems. The
fuzzy inference system of Sugeno type can be considered as an
adaptive neural fuzzy inference system in the form similar to neu-
ral networks in which by training the system on input/output data
set the parameters of the fuzzy inference membership functions or
antecedent parameters and the parameters of the Sugeno fuzzy
system output function or consequent parameters (pi, qi and ri)
are adapted. It can be seen that by training the parameters are opti-
mized which can be placed in two sets: antecedent parameters and
consequent parameters. As the consequent parameters are linear
the linear least square method is used in parameter optimizing
while a gradient descent algorithm such as backpropagation algo-
rithm is used in antecedent parameter optimizing.
Fig. 3 shows the ANFIS system general architecture for a fuzzy
inference system with two inputs x and y and one output fout.
Basically, ve layers are used to construct this inference system
(Fig. 2). Each ANFIS layer consists of several nodes described by the
node function. The inputs of present layers are obtained from the
nodes in the previous layers. The rule base of ANFIS contains fuzzy
IF-THEN rules of Sugeno type. For a rst order Sugeno fuzzy infer-
ence system, the two rules may be stated as:
Rule1 : IF x is A1 AND y is B1 THEN z is f 1 x; y
Rule2 : IF x is A2 AND y is B2 THEN z is f 2 x; y
where x and y are the inputs of ANFIS, Ai and Bi are the fuzzy sets
and fi(x, y) is a rst order polynomial and represents the outputs
of the rst order Sugeno fuzzy inference system. The architecture
of ANFIS is shown in Fig. 3, and the node function in each layer is
described below. Adaptive nodes, denoted by squares, represent

Fig. 4. Relative error ow chart for all ve prediction days.

6060 I. Svalina et al. / Expert Systems with Applications 40 (2013) 60556063

Table 2 xi
Q 3;i -i P for i 1; 2 4
Average relative error by prediction days in percentage. xi
First day Second day Third day Fourth day Fifth day
The output -i represents the normalized ring strength of a rule.-
AvRE 0.8687 0.9563 1.3586 1.4249 1.4027 Layer 4: Every node in this layer is an adaptive node, marked by a
square, with node function
Q 4;i -i  fi for i 1; 2 5

the parameter sets that are adjustable in these nodes, whereas xed where f1 and f2 are the fuzzy IF-THEN rules as follows:
nodes, denoted by circles, represent the parameter sets that are Rule1 : IF x is A1 and y is B1 THEN f 1 p1 x q1 y r 1
xed in the system. Rule2 : IF x is A2 and y is B2 THEN f 2 p2 x q2 y r 2
Layer 1: this layer contains adaptive nodes with node functions
described as where pi, qi and ri are the parameter set, referred to as the conse-
quent parameters.
Q 1;i lAi x for i 1; 2 Layer 5: This layer has only one xed node, marked by a circle.
1
Q 1;i lBi2 y for i 3; 4 The node function is to compute the overall output by
X
where x and y are the input nodes, A and B are the linguistic labels, Q 5;i fout -i  fi ov erall output 6
l(x) and l(y) are the membership functions. There are many types
of the membership functions that can be used. However, a bell From the ANFIS structure mentioned above, the overall output can
shaped function with maximum and minimum equal to 1 and 0 is be expressed as linear combination of the consequent parameters.
usually adopted. It can be written as follows Hence, the nal output can be written as
x1 x2
1 fout -1  f1 -2  f2 f f
lx or x1 x2 1 x1 x2 2
i 2bi
1 xc
a
-1  xp1 -1  yq1 -1 r 1 -2  xp2
i  2
x  ci -2  yq2 -2 r 2 7
lx exp 
ai
where ai, bi and ci are the parameter set. The bell shaped functions 4. Obtained results
vary while the values of this parameter are changing.
Layer 2: Every node in this layer is a xed node, marked by a cir- In this paper a model is proposed for predicting the Zagreb
cle. The node function has to be multiplied by input signals to serve Stock Exchange Crobex index close price value on the basis of sev-
as output for every node. eral days. The model is explained in detail in chapter 2. The model
Q 2;1 x1 lAi x  lBi y for i 1; 2 3 predicts the index close price 5 days in advance, separately for
every day. In addition, historical time sequence is simulated so that
The output xi represents the ring strength of a rule. the rst close price prediction day, 25 January 2012, is the same as
Layer 3: Every node in this layer is a xed node, marked by a cir- the rst prediction day of the rst shifting increment of 5 days in
cle and labeled N, with the node function to normalize the ring advance, while 19 October 2012 is the last day close price predic-
strength by calculating the ratio of the ith node ring strength to tion day and it is the same as the fth prediction day of the last
the sum of all rules ring strength. shifting increment of 5 days in advance.

Fig. 5. Average relative error.

 I. Svalina et al. / Expert Systems with Applications 40 (2013) 60556063 6061

Fig. 6. Coefcient of variation of root square mean error for the ve prediction days.

1X n
jclosepti  closepforecastti j
Table 3 Av RE 8
Average coefcient of variation of root square mean error AvCV(RSME) in n i1 jclosepti j
percentages.

First day Second day Third day Fourth day Fifth day r

Pn
AvCV(RSME) 1.5613 1.3914 2.0450 2.0038 1.9083 i1
closepti closepforecastti
RSME n
Av CVRSME 9
closep closep

The average relative error and the average coefcient of varia- where AvRE is the average relative error, AvCV(RSME) the average
tion of root mean square error will be used for evaluation of the coefcient of variation of root square mean error, RSME the root
model performances. square mean error, close(t) the actual close price, closeforecast(t)
the predicted close price, and closep is the close price average value.

Fig. 7. Average coefcient of variation of root square mean error.

6062 I. Svalina et al. / Expert Systems with Applications 40 (2013) 60556063

Fig. 8. Actual and predicted close price by prediction days.

Table 4 index close price 5 days into relative future starting from the last
AvRE, AvCV(RSME) and the amounts ratio of the real and the predicted price (RATIO). close price included in the input/output data set. The input/output
data set is moved 38 times by 5 days increment and the testing is
First day Second day Third day Fourth day Fifth day
conducted on 37 shifts by 5 days increment because the time ow
AvRE 0.6643 1.0039 1.4060 1.6602 1.5695
reaches the present time at that moment.
AvCV(RSME) 0.6667 1.0056 1.4000 1.6522 1.5750
RATIO 0.9994 1.0013 1.0025 1.0042 1.0034 Fig. 8 depicts the diagrams of the Zagreb Stock Exchange
Crobex index actual and predicted close price for all prediction
days in the phase of testing.
Table 4 shows the values of average relative error (AvRE), aver-
Fig. 4 shows the relative error ow chart for all ve prediction age coefcient of variation of root square mean error AvCV(RSME)
days with regard to the shifting increment of 5 days in advance and the ratio of the sums of the actual close price and the predicted
in the phase of checking. close price by every prediction day in the phase of testing.
Table 2 depicts average relative error (AvRE) by prediction days
in checking phase.
Fig. 5 shows the average relative error (AvRE) diagram by pre- 5. Conclusion
diction days in the phase of checking.
Fig. 6 represents the ow chart of the coefcient of variation of The paper deals with the problem of stock market prediction.
root square mean error CV(RSME) for the ve prediction days with The prediction model is built based on the ANFIS system and the
regard to the shifting increment of 5 days in advance in the phase model performances are estimated by the average relative error
of checking. and the average coefcient of variation of root square mean error.
Table 3 depicts the average coefcient of variation of root The obtained results are represented through two phases: the
square mean error AvCV(RSME) by prediction days in the phase phase of the model checking and the phase of the model testing,
of checking. discussed in Chapter 4. It is important to emphasize that the used
Fig. 7 shows a diagram of the average coefcient of variation of model does not in any way consider outside inuences such as
root square mean error AvCV(RSME) by prediction days in the political, and economic either qualitatively or quantitatively.
phase of checking. The obtained results show that in the checking phase the mod-
The above shows the results obtained in the phase of checking. els approximation of the Crobex index closing price is quite sat-
It was already mentioned that the input/output data set is divided isfactory. It is obvious from Tables 2 and 3 that for any of the
in two subsets: subset for training and subset for checking. In what prediction days the average relative error is less than 1.5% and
follows will be shown the results obtained in the testing phase of the average coefcient of variation of root square mean error is less
the model. The testing is conducted so as to forecast the Crobex than 2.5%. Nevertheless, some striking data for relative error and
 I. Svalina et al. / Expert Systems with Applications 40 (2013) 60556063
coefcient of variation of root square mean error can be seen in
Figs. 4 and 6 diagrams. Therefore, one should be careful and try
to register the most important inuences previous to the forecasts.
When the average coefcient of variation of root square mean
error per prediction days is in question, better results are achieved
in the phase of testing than in the phase of checking. The most
obvious reason for such results is in the data sets for testing per
prediction days which are several times smaller than the data sets
for checking.
Although the ANFIS method is applied in the model creation one
has to bear in mind that the gradient descent method is used in
optimizing parameters of membership functions and the least
square method in optimizing consequent parameters of overall
output function. This is why the model follows the previous trend
in stock prices which results in its evidently better approximation
when the trend is monotonous. It is obvious from Fig. 8 that the
prediction is considerably more accurate in the intervals when
the trend is monotonous. If the ratio of the amounts of the actual
and predicted Crobex index close prices is taken as an indicator,
then there is a paradox of evaluation performances within the cur-
rent research. Supposing it is crucial whether the prediction is
higher or lower than the actual value the amounts ratio could be
regarded as a measure of accumulation. If the ratio exceeds one
the accumulation is positive, if it is smaller than one the accumu-
lation is negative and if the ratio is the same there is no accumula-
tion. According to Table 4 better accumulation is achieved on days
with higher average relative errors and average coefcients of var-
iation of root square mean error.
During the model testing span of time from 25 January 2012 to
19 October 2012 the Crobex index relative shifting (increase, de-
crease) exceeded 1.5% only twice and as shown in Table 4 the aver-
age relative error per prediction days was about 1.5% with the
exception of the rst and second prediction days. As the shifting
increment was 5 days in the testing phase, it was impossible to
predict the day with more than 1.5% shifting, therefore the average
relative error was assumed to be 1.5%. The current model cannot
reliably be used to judge the Crobex index trends in prices in view
of the market returns for the reason given above but also due to its
high sensibility to the stock non-monotonic trends. Nevertheless, it
can be very useful in forecasting whether the index close price will
increase or decrease.
In further investigations this model could be implemented in
predicting some other indices in order to see if there would be
any major changes in the results. The prediction approach used
in this model should be also compared with some other ap-
proaches based on the same method. The number of inputs could
be increased so as to examine what impact this would have on
the model approximation performances in predicting the same in-
dex in the same period of time.
6063
References
Afolabi, M. O., Olude, O. (2007). Predicting stock prices using a hybrid Kohonen Self
Organizing Map (SOM). In Proceedings of the annual hawaii international
conference on system sciences 2007, [Article number 4076488].
Alizadeh, M., Jolai, F., Aminnayeri, M., & Rada, R. (2012). Comparison of different
input selection algorithms in neuro-fuzzy modeling. Expert Systems with
Applications, 391, 5361544.
Alizadeh, M., Rada, R., Jolai, F., & Fotoohi, E. (2011). An adaptive neuro-fuzzy system
for stock portfolio analysis. International Journal of Intelligent Systems, 26,
99114.
Ansari, T., Kumar, M., Shukla, A., & Tiwari, R. (2010). Sequential combination of
statistics, econometrics and adaptive neural-fuzzy interface for stock market
prediction. Expert Systems with Applications, 37, 51165125.
Atsalakis, G. S., Dimitrakakis, E. M., & Zopounidis, C. D. (2011). Elliott wave theory
and neuro-fuzzy systems, in stock market prediction: The WASP system. Expert
Systems with Applications, 38, 91969206.
Atsalakis, G. S., & Valavanis, K. P. (2009). Forecasting stock market short-term trends
using a neuro-fuzzy based methodology. Expert Systems with Applications, 36,
1069610707.
Boyacioglu, M. A., & Avci, D. (2010). An adaptive network-based fuzzy inference
system (ANFIS) for the prediction of stock market return: The case of the
instanbul stock exchange. Expert Systems with Applications, 377, 9087912.
Casiano, R., & Mora, M. (2002). Prediccin de Series de Tiempo Caticas con reglas
difusas IF-THEN. Logic Fuzzy Seminar Puebla University Autonoma.
Cheng, P., & Quek, C. (2007). Predicting the impact of anticipatory action on US stock
market An event study using ANFIS (a neural fuzzy model). Computational
Intelligence, 23, 117141.
Cheng, C.-H., Wei, L.-Y., & Chen, Y.-S. (2009). Fusion ANFIS models based on multi-
stock volatility causality for TAIEX forecasting. Neurocomputing, 72, 3462
3468.
Esfahanipour, A., & Aghamiri, W. (2010). Adapted Neuro-fuzzy inference system on
indirect approach TSK fuzzy rule base for stock market analysis. Expert Systems
with Applications, 37, 47424748.
Hsieh, T.-J., Hsiao, H.-F., & Yeh, W.-C. (2011). Forecasting stock markets using
wavelet transforms and recurrent neural networks: An integrated system
based on articial bee colony algorithm. Applied Soft Computing, 11,
25102525.
Jing-Rong, C., Liang-Ying, W., & Ching-Hsue, C. (2011). A hybrid ANFIS model based
on AR and volatility for TAIEX forecasting. Applied Soft Computing, 11,
13881395.
Kaboudan, M. A. (2000). Genetic programming prediction of stock prices.
Computational Economics, 16, 207236.
Kim, K., & Lee, W. B. (2004). Stock market prediction using articial neural networks
with optimal feature transformation. Neural Computing and Applications, 13,
255260.
Liang-Ying, W., Tai-Liang, C., & Tien-Hwa, H. (2011). A hybrid model based on
adaptive-network-based fuzzy inference system to forecast Taiwan stock
market. Expert Systems with Applications, 38, 1362513631.
Melin, P., Soto, J., Castillo, O., & Soria, J. (2012). A new approach for time series
prediction using ensembles of ANFIS models. Expert Systems with Applications,
39, 34943506.
Olatunji, S. O., Al-Ahmadi, M. S., Elshafei, M., Fallatah, Y.A. (2011). Saudi Arabia stock
prices forecasting using articial neural networks. In 4th International
conference on the applications of digital information and web technologies,
ICADIWT 20011, [Article number 6041425, pp. 8186].
Tan, Z., Quek, C., & Cheng, Philip Y. K. (2011). Stock trading with cycles: A nancial
application of ANFIS and reinforcement learning. Expert Systems with
Applications, 38, 47414755.
Zadeh, L. (1965). Fuzzy sets. Information and Control, 8(3), 338353.
Zhai, F., Wen, Q., Yang, Z., Song, Y., (2010). Hybrid forecasting model research on
stock data mining. In NISS2010 4th International conference on new trends in
information science and service science 2010, [Article number 5488542, pp.
630633].