Self-adaptive type-1/type-2 hybrid fuzzy reasoning techniques for two-factored stock index time-series prediction

Considerable research outcomes on stock index time-series prediction using classical (type-1) fuzzy sets are available in the literature. However, type-1 fuzzy sets cannot fully capture the uncertainty involved in prediction because of its limited representation capability. This paper fills the void. Here, we propose four chronologically improved methods of time-series prediction using interval type-2 fuzzy sets. The first method is concerned with prediction of the (main factor) variation time-series using interval type-2 fuzzy reasoning. The second method considers secondary factor variation as an additional condition in the antecedent of the rules used for prediction. Another important aspect of the first and the second methods is non-uniform partitioning of the dynamic range of the time-series using evolutionary algorithm, so as to ensure that each partition includes at least one data point. The third method considers uniform partitioning without imposing any restriction on the number of data points in a partition. The partitions are here modeled by type-1 fuzzy sets, if there exists a single block of contiguous data, and by interval type-2 fuzzy sets, if there exists two or more blocks of contiguous data in a partition. The fourth method keeps provision for tuning of membership functions using recent data from the given time-series to influence the prediction results with the current trends. Experiments undertaken confirm that the fourth technique outperforms the first three techniques and also the existing techniques with respect to root-mean-square error metric.