A Study on the Application of the “Bayes-Fuzzy” Model for Financial Market Forecasting

• Jobson M. Silva USP
• Jaime S. Sichman USP
• Paulo S. Cugnasca USP

Abstract

In the context of quantitative investment funds (or quant funds), with partially or totally automated investment strategies, this work proposes a simplified model that can be used as an initial step for a practical application in this field. The model, which is entitled “Bayes-Fuzzy”, makes use of fuzzy logic and Bayes theorem to forecast financial market variables and use that forecast to guide investment decisions. The proposed model was implemented and tested for investments in the Brazilian stock market (Bovespa). According to the obtained experimental results, a quant fund using this model was able to achieve a higher yield than the “buy and hold” strategy.

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