Improving Decision Effectiveness of Artificial Neural Networks: A Modified Genetic Algorithm Approach

This study proposes the use of a modified genetic algorithm (MGA), a global search technique, as a training method to improve generalizability and to identify relevant inputs in a neural network (NN) model. Generalizability refers to the NN model’s ability to perform well on exemplars (observations) that were not used during training (outof-sample); improved generalizability enhances NN’s acceptability as a valid decisionsupport tool. The MGA improves generalizability by setting unnecessary weights (or connections) to zero and by eliminating these weights. Because the eliminated weights have no further impact on the training (in-sample or out-of-sample data), the relevant variables can be identified from the model. By eliminating unnecessary weights, the MGA is able to search and find a parsimonious model that generalizes well. Unlike the traditional NN, the MGA identifies the model variables that contribute to an outcome, helping decision makers to rationalize output and accept results with greater confidence. The study uses real-life data to demonstrate the use of MGA. Subject Areas: Artificial Intelligence, Decision Support, Financial Distress, and Genetic Algorithm.