Genetic Algorithms and Stocks

In NY Times today there’s a very interesting article about Ray Kurzweil is creating a stock-picking computer using A.I.. Check this out: A Smarter Computer to Pick Stocks by CHARLES DUHIGG

from the article:

Studies estimate that a third of all stock trades in the United States were driven by automatic algorithms last year, contributing to an explosion in stock market activity. Between 1995 and 2005, the average daily volume of shares traded on the New York Stock Exchange increased to 1.6 billion from 346 million.

For years, computer scientists had tried to help machines perform mundane tasks like reading printed words or telling faces apart. With algorithms similar to those used by stock pickers, programmers created millions of rules designed to tell an “A� from an “a.� But no machine could read a page of text as well as the average child.

So Mr. Kurzweil and others took a different tack: instead of creating sequential rules to instruct a computer to read, they thought, why not create thousands of random rules and let the computer figure out what works?

The result was nonlinear decision making processes more akin to how a brain operates. So-called “neural networks� and “genetic algorithms� have become common in higher-level computer science. Neural networks permit computers to create new rules and automatically change underlying assumptions by experimenting with thousands of random sequences and processes. Genetic algorithms encourage software to “evolve� by letting different rules compete, and combining the most successful outcomes.

Posted on November 24, 2006 in Misc, News

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