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Deep learning networks for stock market analysis and prediction: Methodology, data representations, and case studies - 2017

Deep Learning Networks For Stock Market Analysis And Prediction: Methodology, Data Representations, And Case Studies

Research Area:  Machine Learning

Abstract:

We offer a systematic analysis of the use of deep learning networks for stock market analysis and prediction. Its ability to extract features from a large set of raw data without relying on prior knowledge of predictors makes deep learning potentially attractive for stock market prediction at high frequencies. Deep learning algorithms vary considerably in the choice of network structure, activation function, and other model parameters, and their performance is known to depend heavily on the method of data representation. Our study attempts to provides a comprehensive and objective assessment of both the advantages and drawbacks of deep learning algorithms for stock market analysis and prediction. Using high-frequency intraday stock returns as input data, we examine the effects of three unsupervised feature extraction methods—principal component analysis, autoencoder, and the restricted Boltzmann machine—on the network’s overall ability to predict future market behavior. Empirical results suggest that deep neural networks can extract additional information from the residuals of the autoregressive model and improve prediction performance; the same cannot be said when the autoregressive model is applied to the residuals of the network. Covariance estimation is also noticeably improved when the predictive network is applied to covariance-based market structure analysis. Our study offers practical insights and potentially useful directions for further investigation into how deep learning networks can be effectively used for stock market analysis and prediction.

Keywords:  

Author(s) Name:  Eunsuk Chong,Chulwoo Han,Frank C. Park

Journal name:  Expert Systems with Applications

Conferrence name:  

Publisher name:  Elsevier

DOI:  10.1016/j.eswa.2017.04.030

Volume Information:   Volume 83, 15 October 2017, Pages 187-205