Interpretable multi-criteria fuzzy rule based decision models for hedge fund management

Abstract

This paper describes an approach to constructing fuzzy rules for predictive modeling that involves a local search heuristic and an evolutionary algorithm. This approach is applied for learning strategies to manage a portfolio that comprises positions in the share market. We provide experimental results comparing the approach to random strategies and the market index. A non-linear prediction model that relates asset performance to a large set of explanatory variables is represented with fuzzy rules. Rulebases are combined to build multi-criteria recommendations for trading decisions that consider different forecast horizons and both risk and return criteria.