Emerging Market Anlaysis: Using a Genetic Algorithm-based Approach to Investigate the Effects of Interest Rate changes on Market Timing

摘要

We have used a genetic algorithm-based data mining tool to unearth information about the effects of the global and local interest rates on the local stock market and deduce which has the dominant effect on the maret growth. Our analyses are based on weekly data of the Price-Earning (PE) ratio of the KLCI (Kuala Lumpur Composite Index), the US, Japanese and Malasian interest rates. Based on the initial GA analysis (preprocessing), the local (Malaysian) interest rates appear to have the greatest effect on market growth, and a further detailed investigation of the local interest rate levels and the market PE provides insights to the formulation of an emerging market timing model based on interest rate movements.