Constructing a dynamic stock portfolio decision-making assistance model: Using the Taiwan 50 Index constituents as an example

Mei Chih Chen*, Chang Li Lin, An-Pin Chen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


There are several decisions in investment management process. Security selection is the most time-consuming stage. Tatical allocation is in order to take advantage of market opportunities based on short-term prediction (Amenc and Le Sourd in Portfolio theory and performance analysis. Wiley, 2003). Although it is difficult to keep track of the fluctuations of volatile financial markets, the capacity of artificial intelligence to perform spatial search and obtain feasible solutions has led to its recent widespread adoption in the resolution of financial problems. Classifier systems possess a dynamic learning mechanism, they can be used to constantly explore environmental conditions, and immediately provide appropriate decisions via self-aware learning. This study consequently employs a classifier system in conjunction with real number encoding to investigate how to obtain optimal stock portfolio based on investor adjustment cycle. We examine the constituents of the TSEC Taiwan 50 Index taking moving average (MA), stochastic indicators (KD), moving average convergence divergence (MACD), relative strength index (RSI) and Williams %R (WMS %R) as input factors, adopting investor-determined adjustment cycle to allocate capital, and then constructing stock portfolio. We have conducted empirical testing using weekly and monthly adjustment cycle; the results revealed that this study's decision-making assistance model yields average annual interest rate of 49.35%, which is significantly better than the -6.59% of a random purchase model. This research indicates that a classifier system can effectively monitor market fluctuations and help investors obtain relatively optimal returns. The assistance model proposed in this study thus can provide really helpful decision-making information to investors.

Original languageEnglish
Pages (from-to)1149-1156
Number of pages8
JournalSoft Computing
Issue number12
StatePublished - Oct 2007


  • Capital allocation
  • Classifier system
  • Dynamic stock portfolio
  • Real number encoding


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