ECMODE-03235; No of Pages 7

Economic Modelling xxx (2014) xxxxxx

Contents lists available at ScienceDirect

Economic Modelling
journal homepage: www.elsevier.com/locate/ecmod

PSO-based high order time invariant fuzzy time series method: Application to stock
exchange data
Erol Egrioglu
Ondokuz Mays University, Department of Statistics, Turkey

a r t i c l e

i n f o

Article history:
Accepted 18 February 2014
Available online xxxx
Keywords:
Fuzzy time series
Particle swarm optimization
Fuzzy c-means
Forecasting
Dene fuzzy relation

a b s t r a c t
Fuzzy time series methods are effective techniques to forecast time series. Fuzzy time series methods are based
on fuzzy set theory. In the early years, classical fuzzy set operations were used in the fuzzy time series methods. In
recent years, articial intelligence techniques have been used in different stages of fuzzy time series methods. In
this paper, a novel fuzzy time series method which is based on particle swarm optimization is proposed. A high
order fuzzy time series forecasting model is used in the proposed method. In the proposed method, determination of fuzzy relations is performed by estimating the optimal fuzzy relation matrix. The performance of the proposed method is compared to some methods in the literature by using three real world time series. It is shown
that the proposed method has better performance than other methods in the literature.
2014 Elsevier B.V. All rights reserved.

1. Introduction
Fuzzy time series methods have different approaches to uncertainty
from probabilistic statistical methods. Classical time series analysis
methods are probabilistic methods, and they need some strict assumptions. Moreover, probabilistic methods don't take into consideration
fuzziness. However, some real life time series contain fuzziness. Because
of this fact, various fuzzy time series methods were proposed in the literature. Fuzzy time series methods do not need any assumptions like
normality and linearity.
Fuzzy time series methods were rst dened in Song and Chissom
(1993a). First denitions and methods were based on fuzzy set theory
and some fuzzy set operations. Song and Chissom (1993a) dened
two different fuzzy time series types: time variant and time invariant.
The rst time invariant fuzzy time series method was proposed in
Song and Chissom (1993b). There have been a lot of studies about
time invariant fuzzy time series in the literature. But there have been
a limited number of studies about time variant fuzzy time series.
When fuzzy time series methods are examined, it can be said that
they consist of three stages: fuzzication, determining fuzzy relation
and defuzzication. Fuzzy time series methods are based on different
forecasting models. The forecasting models can be rst order or high
order. When the rst order models are used, it is assumed that fuzzy
time series is caused by one order lagged fuzzy time series. Similarly,
when nth order fuzzy time series forecasting model is used, fuzzy
time series are caused by 1,2,,n order lagged fuzzy time series.
In the literature, many methods are used for determining fuzzy relations. These methods are using fuzzy logic group relation tables, articial neural networks, fuzzy relation matrices obtained from some
fuzzy set operations, particle swarm optimization and genetic
algorithms. Chen (1996, 2002), Lee et al. (2007, 2008), Duru et al.

(2010), Lee et al. (2013), Uslu et al. (2013), Bulut (2014) and Chen
and Chen (2014) used fuzzy logic group relation tables. Aladag et al.
(2009), Egrioglu et al. (2009a,b), Yolcu et al. (2013) and Aladag
(2013) used some type of articial neural networks. Song and
Chissom (1993b, 1994) used a fuzzy relation matrix obtained from
some fuzzy set operations. Egrioglu (2012) used a fuzzy relation matrix
obtained from a genetic algorithm and Aladag et al. (2012) used a fuzzy
relation matrix obtained from particle swarm optimization. Aladag et al.
(2012) and Egrioglu (2012) methods are based on rst order fuzzy time
series forecasting models. The high order models are needed to forecast
many real life time series. Chen (2002), Lee et al. (2007, 2008), Kuo et al.
(2009, 2010), Park et al. (2010), Chen and Chung (2006), Hsu et al.
(2010), Egrioglu et al. (2009a,b, 2010), Aladag et al. (2009), Chen
(2013), Qiu et al. (2013), and Jilani and Burney (2008) studies are
based on the high order fuzzy time series forecasting model. Some
methods which are used to determine fuzzy relations didn't take into
consideration membership values of fuzzy sets. Song and Chissom
(1993b), Yolcu et al. (2013), Yu and Huarng (2010), Egrioglu (2012)
and Aladag et al. (2012) papers took into consideration membership
values of fuzzy sets.
In this study, a novel fuzzy time series method is proposed. The proposed method uses the fuzzy c-mean method in fuzzication stage, and
the particle swarm optimization method in the determining fuzzy relation stage. The proposed method is based on the high order fuzzy time
series forecasting model. The proposed method is an improved version
of the Aladag et al. (2012) method. Aladag et al. (2012) was based on
the rst order fuzzy time series forecasting model as distinct from the
proposed method. Particle swarm optimization is summarized in the
second section of this paper. In the third section, the particulars of the
proposed method are given. The application results are given in the fourth
section. The results are discussed in the last section of the paper.

http://dx.doi.org/10.1016/j.econmod.2014.02.017
0264-9993/ 2014 Elsevier B.V. All rights reserved.

Please cite this article as: Egrioglu, E., PSO-based high order time invariant fuzzy time series method: Application to stock exchange data, Econ.
Model. (2014), http://dx.doi.org/10.1016/j.econmod.2014.02.017

E. Egrioglu / Economic Modelling xxx (2014) xxxxxx

2. Particle swarm optimization

Particle swarm optimization, which is an articial intelligence technique, was rstly proposed by Kenedy and Eberhart (1995). There have
been different versions of particle swarm optimization in the literature.
Shi and Eberhart (1999) used time varying inertia weight and Ma et al.
(2006) used time varying acceleration coefcients in their algorithm. An
algorithm which uses time varying inertia weight and a time varying acceleration coefcient is given below. We called this algorithm modied
particle swarm optimization. This algorithm was rstly used in Aladag
et al. (2012).

Step 4. Let c1 and c2 represent cognitive and social coefcients, respectively, and w is the inertia parameter. Let (c1i, c1f), (c2i, c2f), and
(w1, w2) be the intervals which include possible values for c1, c2
and w, respectively. In each iteration, these parameters are calculated by using the formulas given in Eqs. (5), (6) and (7).


c1 c1 f c1i

t
c1i
maxt


 maxtt
c2i
c2 c2 f c2i
maxt

maxtt
w1
maxt

Algorithm 1. The modied particle swarm optimization

Step 1. Positions of each kth (k = 1,2, , pn) particle's positions are
randomly determined and kept in a Xk given as follows:
n
o
X k xk;1 ; xk;2 ; ; xk;d ; k 1; 2; ; pn

where xk,i (i = 1,2,,d) represents ith position of kth particle.

pn and d represent the number of particles in a swarm and positions in a particle, respectively.
Step 2. Velocities are randomly determined and stored in a vector Vk
given below.
n
o
V k vk;1 ; vk;2 ; ; vk;d ; k 1; 2; ; pn:

Step 3. According to the evaluation function, Pbest and Gbest particles

given in Eqs. (1) and (2), respectively, are determined.


Pbest k pk;1 ; pk;2 ; ; pk;d ; k 1; 2; ; pn



Gbest pg;1 ; pg;2 ; ; pg;d

where Pbestk is a vector stores the positions corresponding to

the kth particle's best individual performance, and Gbest represents the best particle, which has the best evaluation function
value found so far.

w w2 w1

where maxt and t represent the maximum iteration number

and the current iteration number, respectively.
Step 5. Values of velocities and positions are updated by using the formulas given in Eqs. (8) and (9), respectively.
h



i
t1
t
t
t
vi; j w  vi; j c1  rand1  pi; j xi; j c2  rand2  pg; j xi; j

t1

t1

xi; j xi; j vi; j

where rand1 and rand2 are generated random values from the
interval [0,1].
Step 6. Steps 3 to 5 are repeated until a predetermined maximum iteration number (maxt) is reached.
3. The proposed method
There have been a lot of studies about fuzzy time series methods in
the literature. The most important differences in fuzzy time series
methods from classical methods are membership values and the advantages of membership values. Although the defuzzication process is
performed in the fuzzy time series methods, obtaining fuzzy forecasts

Fig. 1. Flow chart of the proposed method.

Please cite this article as: Egrioglu, E., PSO-based high order time invariant fuzzy time series method: Application to stock exchange data, Econ.
Model. (2014), http://dx.doi.org/10.1016/j.econmod.2014.02.017

E. Egrioglu / Economic Modelling xxx (2014) xxxxxx

Fig. 2. Positions of one particle.

is still a good advantage because of membership values. In the literature,

some studies didn't take into consideration these membership values in
the determination of fuzzy relation stage. Aladag et al. (2012) proposed
a fuzzy time series method which is based on particle swarm optimization. The Aladag et al. (2012) method used the rst order fuzzy time series forecasting method. Better quality forecasts can be obtained from
high order models instead of rst order models. The high order fuzzy
time series forecasting model is dened as below.
Denition. Let F(t) be a time invariant fuzzy time series. If F(t) is caused
by F(t 1), F(t 2), , and F(t n) then this fuzzy logical relationship
is represented by
F tn; ; F t2; F t1 F t

10

and it is called the nth order fuzzy time series forecasting model.
To obtain forecasts from a high order model (10) can be used in intersection operations. After R fuzzy relation matrix is obtained, fuzzy
forecasts can be calculated by using Eq. (11).

F t F tn F t2 F t1R

11

where is maxmin composition. R matrix was obtained by using

maxmin compositions and union operations in Song and Chissom
(1993b). These operations were very complex and time consuming in
Song and Chissom (1993b).
Model (10) is used in the proposed novel fuzzy time series forecasting method. The novel method is an improved version to high order
models of Aladag et al. (2012). The proposed method is using the
fuzzy c-mean method that was proposed in Bezdek (1981) in the
fuzzication stage, and the particle swarm optimization method in the
determining fuzzy relation stage. Some advantages of the proposed
method are listed below:
Because of using fuzzy c-means in fuzzication stage, there is no need
for subjective decisions like determining interval length.
The proposed method takes into consideration membership values.
Because R relation matrix is obtained from particle swarm optimization, there is no necessity for complex and time consuming matrix
operations.
Because the proposed method is based on the high order fuzzy time
series forecasting model, the better quality forecasts can be obtain
from the proposed method for real life time series.

Fig. 3. The sequence chart of IMKB data.

The proposed method is given in Algorithm 2 and a ow chart of the

proposed method is given in Fig. 1.
Algorithm 2.
Step 1. The parameters of the proposed method are determined. These
parameters are:
pn: Particle number of swarm
[c1i, c1f]: Cognitive coefcient interval
[c2i, c2f]: Social coefcient interval
maxt: Maximum iteration number
fsn: Number of fuzzy set
ntest: Observation number of test
n: Model order.
The root of mean square error (RMSE) is used as a tness function in the
proposed method. RMSE is calculated according to Eq. (12).
RMSE

r
1 Xn
^t 2
y y
t1 t
n

12

^t , and n represent crisp time series, defuzzied forecasts, and

where yt, y
the number of forecasts, respectively.
Step 2. The fuzzy c-mean method is applied to the training data of time
series. The cluster centers of fsn fuzzy sets Lr (r = 1,2,,fsn) and
membership values of training data observations are obtained
by the fuzzy c-mean method. The fuzzy sets are redesigned according to the ascending ordered centers. The membership
values of test data observations are obtained from cluster centers which were determined for training data by fuzzy cmean. Fuzzy c-mean method is iteratively applied according to
the Bezdek (1981) procedure. First, the initial cluster centers
are simulated by the interval on which time series is dened.
The memberships are calculated according to Eq. (14).
Eqs. (13) and (14) are consecutively used.
n
X

vi

uij x j

j1
n
X

13

uij

j1

uij

1
 12 =
0 
1
fsn
d x j ; vi
X
@ 
A
d x j ; vk
k1

14

where is fuzziness indices and d(.) is Euclidean distance, x1, x2,

, xn are observations of training data and uij is membership
value of xj to ith fuzzy set. At the end of the FCM application processes, cluster centers vi(i = 1, 2, , c) and membership values
of training data observations to all fuzzy sets (uij, i = 1, 2, , c;
j = 1, 2, , n) are obtained. The cluster centers are sorted into
an ascending order and the membership values are arranged
by the sort of orders.
Step 3. Generate a random initial positions and velocities.
In the proposed method, positions are generated by uniform
distribution with (0,1) parameters. Velocities are generated
by uniform distribution with ( 1,1). There are pn particles

Please cite this article as: Egrioglu, E., PSO-based high order time invariant fuzzy time series method: Application to stock exchange data, Econ.
Model. (2014), http://dx.doi.org/10.1016/j.econmod.2014.02.017

E. Egrioglu / Economic Modelling xxx (2014) xxxxxx

Table 1
Forecasting results for IMKB data set.
Date

Test set

Song and Chissom

(1993b)

Chen (1996)

Huarng
(2001)a

Huarng
(2001)b

Huarng and Yu
(2006)

Cheng et al.
(2008)

Yolcu et al.
(2013)

Proposed
method

23.12.2008
24.12.2008
25.12.2008
26.12.2008
29.12.2008
30.12.2008
31.12.2008

26,294
26,055
26,059
26,499
26,424
26,411
26,864
RMSE
MAPE
MAE

26,410
26,410
26,410
26,410
26,410
26,410
26,410
261.01
0.75%
197.14

26,400
26,400
26,400
26,400
26,400
26,400
26,400
259.76
0.75%
198.57

26,200
26,200
26,200
26,200
26,200
26,200
26,200
310.47
0.96%
254

26,100
26,367
26,100
26,100
26,500
26,500
26,500
251.24
0.80%
210.71

26,091
26,091
26,091
26,091
26,608
26,608
26,091
354.72
0.98%
261.85

26,390
26,390
26,390
26,390
26,390
26,390
26,390
258.87
0.76%
200

26,274
26,273
26,339
26,337
26,565
26,429
26,460
219.27
0.67%
177.57

26,342
26,342
26,342
26,342
26,342
26,342
26,639
189.60
0.62%
164.42

a
b

Distribution based method.

Average based method.

and velocities in the swarm. One particle has d positions. In

the proposed method, positions of a particle are elements of
R fuzzy relation matrix. R fuzzy relation matrix has fsn columns and fsn rows and d = fsn fsn. Each fuzzy relation matrix (Ri, i = 1, 2, , pn) is obtained from each particle.
Step 4. Fitness (RMSE) values of the particles are calculated. In the
proposed method, Steps 4.1 and 4.4 are applied to calculate
the RMSE value for each particle.
Step 4.1. Ri fuzzy relation matrix is constituted from particle positions. The ith particle is shown in Fig. 2.
Then R matrix is designed from ith particle as below:
2
6
Ri 6
4

xi;1

xi;2

xi;fsn1

xi;fsn2

xi;fsn1fsn1

xi;fsn1fsn2

xi;fsn
xi;2fsn 7
7:
5

xi;fsnfsn

Step 4.2. Fuzzy forecasts for training data are calculated by

using Eq. (11). For example, let model order be 2,
fsn = 3, F(t 1) = [0.7 0.3 0], F(t 2) = [0.5 0.5 0] and
2

1 0:5
R 4 0:1 0
0:1 0

3
0:5
1 5:
1

Then, fuzzy forecast for t time is calculated as below:



F t F t2 F t1 R

F t2F t1 min0:7; 0:5; min0:3; 0:5; min0; 0 0:5 0:3 0

2
^F t 0:5; 0:3; 0

4

1 0:5
0:1 0
0:1 0

3
0:5
1 5
1


max min0:5; 1; min0:3; 0:1; min0; 0:1
max min0:5; 0:5; min0:3; 0; min0; 0
max min0:5; 1; min0:3; 0:1; min0; 0:1
max0:5; 0:1; 0 max0:5; 0; 0 max0:5; 0:1; 0
^F t 0:5 0:5 0:5:

Step 4.3. Defuzzied forecasts are obtained. The ordered cluster

centers of fuzzy sets and membership values of fuzzy
forecasts are used for the defuzzication stage.
If the membership values of the fuzzy forecast have only one maximum, then take the center value of this set as the defuzzied forecasted value.
If membership values of fuzzy forecast have two or more consecutive maximums, then select the arithmetic mean of the centers of
the corresponding clusters as the defuzzied forecasted value.
Otherwise, standardize the fuzzy output and use the center of the
fuzzy sets as the forecasted value.
Step 4.4. RMSE value is calculated according to Eq. (12).
Step 5. According to RMSE, the Pbest and Gbest particles which are
given in Eqs. (3) and (4), respectively, are determined.
Step 6. Update cognitive coefcient c1, social coefcient c2, and the inertia parameter w at each iteration by using the formulas (5),
(6) and (7), respectively.
Step 7. New velocities and positions of the particles are calculated by
using the formulas given in Eqs. (8) and (9).
Step 8. Repeat Step 4 to Step 8 until maximum iteration bound (maxt)
is reached.
Step 9. Gbest gives optimal fuzzy relation matrix (Roptimal). The
forecasts and RMSE value for test data are calculated by
using Roptimal and applying Steps 4.2 and 4.4.
4. The application
In the literature, there are many studies about stock exchange forecasting. Wei (2013) and Cheng et al. (2013) proposed new hybrid ANFIS
(adaptive network fuzzy inference system) methods to forecast TAIEX
data. Cheng and Wei (2014) proposed a hybrid method to forecast
TAIEX. In this study, the proposed method's performance is compared
with some methods by using three different sets of the stock index
time series. The application results are given in the subsections.

7500
7000
6500

4.1. IMKB application

6000

Fig. 4. The sequence chart of TAIFEX data.

The rst time series is the data of Index 100 for the stocks and bonds
exchange market of Istanbul (IMKB). Observations of IMKB are obtained
daily between 03/October/2008 and 31/December/2008. A sequence
chart of IMKB is given in Fig. 3. The time series has 59 observations.

Please cite this article as: Egrioglu, E., PSO-based high order time invariant fuzzy time series method: Application to stock exchange data, Econ.
Model. (2014), http://dx.doi.org/10.1016/j.econmod.2014.02.017

E. Egrioglu / Economic Modelling xxx (2014) xxxxxx

Table 2
Forecasting results for TAIFEX data set.
Date

Test set

Lee et al. (2007)

Lee et al. (2008)

Aladag et al. (2009)

Hsu et al. (2010)

Aladag (2013)

Aladag et al. (2012)

Proposed method

10.09.1998
11.09.1998
.14.09.1998
15.09.1998
16.09.1998
17.09.1998
18.09.1998
19.09.1998
21.09.1998
22.09.1998
23.09.1998
24.09.1998
25.09.1998
28.09.1998
29.09.1998
30.09.1998

6709.75
6726.50
6774.55
6762.00
6952.75
6906.00
6842.00
7039.00
6861.00
6926.00
6852.00
6890.00
6871.00
6840.00
6806.00
6787.00
RMSE
MAPE
MAE

6621.43
6677.48
6709.63
6732.02
6753.38
6756.02
6804.26
6842.04
6839.01
6897.33
6896.83
6919.27
6903.36
6895.95
6879.31
6878.34
93.5
1.09%
74.62

6917.40
6852.23
6805.71
6762.37
6793.06
6784.40
6970.74
6977.22
6874.46
7126.05
6862.49
6944.36
683,188
6843.24
6858.45
6825.64
102.96
1.14%
78.08

6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
6850.00
83.58
0.96%
65.62

6745.45
6757.89
6731.76
6722.54
6753.72
6761.54
6857.27
6898.97
6853.07
6951.95
6896.84
6919.94
6884.99
6894.10
6866.17
6865.06
80.02
0.87%
60.19

6750
6750
6850
6850
6850
6850
6850
6850
6950
6850
6850
6850
6850
6850
6850
6750
72.55
0.82%
56.37

6778
6778
6778
6778
6778
6856
6925
6856
6856
6856
6856
6856
6856
6856
6856
6778
74.94
0.75%
52.05

6826
6741
6741
6741
6963
6963
6894
6894
6894
6894
6894
6894
6894
6894
6826
6926
66.08
0.73%
49.78

if Table 2 is examined, it is clear that the proposed method outperforms the other methods according to RMSE, MAPE and MAE criteria.

The rst 52 and the last 7 observations are used as the training and the
test sets, respectively.
In Yolcu et al. (2013), IMKB data set was forecasted by Song and
Chissom (1993b), Chen (1996), and Huarng (2001) distribution and average based methods, and Huarng and Yu (2006), and Cheng et al.
(2008) methods. The forecasts and RMSE, mean absolute percentage
error (MAPE) and mean absolute error (MAE) values of these methods
are given in Table 1. MAPE and MAE values are calculated by using Eqs.
(15)(16).
MAPE

MAE



^t 
1 Xn yt y


t1
n
yt 

15

1 Xn
^t j:
jy y
t1 t
n

16

The best forecasts are obtained from these methods in the following
situations: In Song and Chissom (1993b), the number of fuzzy sets is 12;
in Chen (1996), length of interval is 1200; in Huarng and Yu (2006)
ratio based method, ratio sample percentile is 0.5; in Cheng et al.
(2008), the number of fuzzy sets is 5; in Yolcu et al. (2013) method,
the number of fuzzy sets is 11 and the number of hidden layer neurons
is 5. In the Huarng (2001) distribution based method, length of interval
is 800; in average based method, length of interval is 200. Moreover, the

best result obtained from the proposed method is given in Table 1. If ve

fuzzy sets and second order model are used in the proposed method, the
best forecast result can be obtained from IMKB data set. In this situation,
it obtained the optimal R matrix given below.
2

0; 8278
6 0; 2988
6
R6
6 0; 4846
4 0; 0000
0; 5778

0; 7949
0; 8823
0; 7052
0; 4821
0:2249

0; 8168
0; 2765
0; 8618
0; 5991
0; 4929

0; 5580
0; 3085
0; 0877
0; 6784
0; 4238

3
0; 0013
0; 0000 7
7
0; 8560 7
7
0; 5065 5
0; 7642

If Table 1 is examined, it is clear that the proposed method is better

than the others according to RMSE and MAPE criteria.
4.2. Taiwan future exchange application
Secondly, the proposed method is applied to Taiwan future exchange (TAIFEX) data whose observations are between 03.08.1998
and 30.09.1998. The time series has 47 observations. The rst 31 and
the last 16 observations are used as the training and the test sets, respectively. The graph of TAIFEX is given in Fig. 4.
TAIFEX data is forecasted by the proposed method. TAIFEX data is
also forecasted by using methods proposed by Lee et al. (2007, 2008),
Aladag et al. (2009), Hsu et al. (2010), Aladag (2013) and Aladag et al.
(2012). The forecast results produced by the methods proposed in
Aladag et al. (2009), Hsu et al. (2010), Aladag (2013) and Aladag et al.
(2012) were taken from corresponding papers. When the proposed

7600
7100
TAIEX

6600
6100
5600
5100

Fig. 5. The sequence graph of TAIEX Data.

Table 3
The results obtained from all methods.
Method

RMSE

Song and Chissom (1993b)

Chen (1996)
Chen (2002)
Huarng and Yu (2006)
Huarng et al. (2007)
Yu and Huarng (2008)
Aladag et al. (2009)
Chen and Chen (2011)
Proposed method

77.86
77.18
71.98
63.57
72.35
67.00
69.80
57.30
51.14

Please cite this article as: Egrioglu, E., PSO-based high order time invariant fuzzy time series method: Application to stock exchange data, Econ.
Model. (2014), http://dx.doi.org/10.1016/j.econmod.2014.02.017

E. Egrioglu / Economic Modelling xxx (2014) xxxxxx

method is applied to TAIFEX data, the best forecasts are obtained from
second order model and ve fuzzy sets. All forecasted results are given
in Table 2.
4.3. Taiwan Stock Exchange Capitalization Weighted Stock Index Application
Finally, the proposed method is applied to Taiwan Stock Exchange
Capitalization Weighted Stock Index (TAIEX) data between 01.01.2004
and 31.12.2004. The sequence chart of the time series is shown in
Fig. 5. The rst 205 observations are used as training set and the last
45 observations are used as a test set.
The forecast results produced by Song and Chissom (1993b), Chen
(1996, 2002), Huarng and Yu (2006), Huarng et al. (2007), Yu and
Huarng (2008), Aladag et al. (2009) and Chen and Chen (2011)
methods were taken from corresponding papers. When the proposed
method is applied to TAIEX data, the best forecasts are obtained from
the second order model and when seven fuzzy sets are used. All forecast
results are given in Table 3.
Moreover, the MAPE value of the proposed method for TAIEX data is
0.0069. It can be concluded that the proposed method outperforms the
other method for TAIEX data according to RMSE criterion. Also, the
MAPE value of the proposed method is very small. The sequence chart
of forecasts and test data is given in Fig. 6.
5. Conclusion and discussions
Determination of the fuzzy relation stage in the fuzzy time series
methods is very important for forecast performance. Aladag et al.
(2012) proposed a rst order fuzzy time series method. In this
paper, this method is successfully improved for a high order fuzzy
time series forecasting model. According to the application results,
the proposed method has better forecasting performance than
many other methods in the literature. Because the proposed method
is based on the high order fuzzy time series forecasting model, real
life time series can be well forecasted. Moreover, the proposed method takes into consideration all membership vales. It should not be
forgotten that the performance of the proposed method can change
for different data sets. It is not easy to say it will outperform other
methods for every data set. As a result of implementation, it can be
seen that the proposed method can produce good forecasts for the
three stock exchange data sets. Although the proposed method is improved to a high order form, the order selection is an important
problem for it. In future studies, order selection for the proposed
method can be achieved by using optimization techniques. If some
new techniques applied in the fuzzication and defuzzication
stages, a better forecasting performance could be obtained from the
proposed method. In the future, proposed method can be easily
modied for better forecasting performance and multivariate fuzzy

6200

Proposed Method
TAIEX Test Set

6100
6000
5900
5800
5700
5600
1

9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45

Fig. 6. The sequence chart of TAIEX data and forecasts of proposed method.

time series models. Although fuzzy time series methods can produce
good forecasts, the condence intervals for forecasts cannot be obtained. It can be said that this is a very big challenge for nonprobabilistic forecasting methods. Obtaining condence intervals of
forecasts for the proposed method will be considered in future
studies.

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Please cite this article as: Egrioglu, E., PSO-based high order time invariant fuzzy time series method: Application to stock exchange data, Econ.
Model. (2014), http://dx.doi.org/10.1016/j.econmod.2014.02.017