Grey-based stock selection system

This paper introduces an approach based on grey theory to assist investors in selecting stocks with the considerations of low risk and easy to use. In order to reduce investment risk, the investors should wait for the stock bottom or top occurred. Nevertheless, how to identify the stock bottom and top is not easy to most investors, this approach solved this problem. We use the data of Taiwan Stock Exchange ranging from November 1996 to February 2002 to collect moving average of price of the stock bottom and top, and then use Grey theory to build the bottom and top patterns set. Finally, we make the suggestion to investors by comparing the similarity between the patterns set and stocks to find out the stocks at trough or peak.