Neural Networks : An Important Component Of Determining The Financial Progress Of A Business

2085 Words9 Pages
Neural Networks in Finance

2600 Words
By Maria L. Vicente
University of Hawaiʻi at Hilo
QBA 362
Fall 2016
Introduction

Predictions are an important component of determining the financial progress of a business. Business decisions rely on forecasting techniques to predict things such as price movements or overall success in markets. In the attempt to forecast market predictions, it must be assumed that future occurrences may be partly based on present and past data (Abu-Mostafa, Yaser S 1996). Further assumptions must be made to conclude that there is a predictable pattern in past data. There is evidence for both the idea that financial market forecasting is futile due to the unpredictable nature of finance, as well as for the idea that financial markets are predictable to an extent. The consequences of financial decision-making imply an inherent need for the use of forecasting tools in making predictions about future occurrences. The issue resides in the fact that there is an abundance of data and information that must be organized and interpreted. A number of techniques may be used to manage present and past data in order to create a forecast prediction, though with more research and trials, neural networks have been shown to be superior in performance.

Traditional Techniques Neural networks provide an alternative solution to the traditionally used statistical methods of forecasting. Traditional method models include variances of linear

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