Evolving Classifiers to Model the Relationship between Strategy and Corporate Performance Using Grammatical Evolution

Authors:
Anthony Brabazon;Michael O'Neill;Conor Ryan;Robin Matthews
Affiliations:
-;-;-;-
Venue:
EuroGP '02 Proceedings of the 5th European Conference on Genetic Programming
Year:
2002

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Abstract

This study examines the potential of grammatical evolution to construct a linear classifier to predict whether a firm's corporate strategy will increase or decrease shareholder wealth. Shareholder wealth is measured using a relative fitness criterion, the change in a firm's marketvalueadded ranking in the Stern-Stewart Performance 1000 list, over a four year period, 1992-1996. Model inputs and structure are selected by means of grammatical evolution. The best classifier correctly categorised the direction of performance ranking change in 66.38% of the firms in the training set and 65% in the out-of-sample validation set providing support for a hypothesis that changes in corporate strategy are linked to changes in corporate performance.