Input Data Preprocessing Method for Exchange Rate Forecasting via Neural Network

Abstract

The aim of this paper is to present a method for neural network input parameters selection and preprocessing. The purpose of this network is to forecast foreign exchange rates using artificial intelligence. Two data sets are formed for two different economic systems. Each system is represented by six categories with 70 economic parameters which are used in the analysis. Reduction of these parameters within each category was performed by using the principal component analysis method. Component interdependencies are established and relations between them are formed. Newly formed relations were used to create input vectors of a neural network. The multilayer feedforward neural network is formed and trained using batch training. Finally, simulation results are presented and it is concluded that input data preparation method is an effective way for preprocessing neural network data.