An Optimal Stock Market Portfolio Proportion Model Using Genetic Algorithm

To reduce the amount of loss due to investment risk, an investor or stockbroker usually forms an optimal stock portfolio. This technique is done to get the maximum return of investment on shares to be purchased. However, in forming a stock portfolio required a fairly complex calculations and certain skills. This work aims to provide an alternative solution in the problem of forming the optimal and efficient stock portfolio composition by designing a system that can help decision making of investors or stockbrokers in preparing stock portfolio in accordance with the policy and risk investment. In this work, determination of optimal stock portfolio composition is constructed by using Genetic Algorithm. The data used in this work are the 4 selected stocks listed on the LQ45 index in 2017. Meanwhile, the calculation of profit and loss rate utilizes a single index model theory. The efficiency of the algorithm has been examined against the population size and crossover and mutation probabilities. The experimental results show that the proposed algorithm can be used as one of solutions to select the optimal stock portfolio

Review Paper on Enhancing Stock Price Prediction with Sentiment Analysis of Bank Nifty Index

Sentiment analysis has emerged as a powerful tool in financial markets, offering the ability to harness market participants' collective wisdom and emotions to make more informed investment decisions. This research paper presents a comprehensive literature review on sentiment analysis models in predicting stock prices, focusing on the Bank Nifty Index, a critical benchmark in the Indian financial sector. The review begins by elucidating the significance of sentiment analysis in stock price prediction, highlighting its pivotal role in capturing market sentiment, investor emotions, and their impact on asset valuations. A detailed overview of sentiment sources, encompassing financial news, social media, reports, and other relevant data streams, provides insight into the rich tapestry of information that sentiment analysis can leverage. The paper delves into various sentiment analysis approaches, from traditional lexicon-based and rule-based methods to cutting-edge machine learning and deep learning techniques. It elucidates the intricate process of integrating sentiment analysis with stock price prediction models, exploring feature concatenation, time series integration, and weighted data to incorporate sentiment insights effectively. Evaluation metrics crucial for assessing the performance of both sentiment analysis models and stock price prediction models are thoroughly discussed. It concludes by highlighting the substantial potential of sentiment analysis in augmenting stock price prediction, offering investors and traders valuable tools to navigate the complexities of financial markets

Determination of Association Rules with Market Basket Analysis: Application in the Retail Sector

Market basket analysis is the process of extracting purchasing trends from records in company databases, taking into account the products that customers buy in a single transaction. In this study, a market basket analysis was conducted on a five-and-a-half year data of a large hardware company operating in the retail sector, and related product categories were identified. In determining the association rules, both the Apriori and FP-Growth algorithms were run separately and their usefulness in such a set of data was compared. In addition, the data set was divided into Data Set-1 and Data Set-2 so that the consistency of the rules was discussed by comparing the correctness of rules extracted from the first data set with rules derived from the second data set containing consecutive timed data

Market Basket Analysis in the Financial Sector – A Customer Centric Approach

Organizations often struggle with their efforts to implement data mining projects successfully. This is often due to the fact that they are influenced by success stories of others that glamorize the outcome of successful initiatives, while understating the persistent rigour and diligence required. Although process models exist for the knowledge discovery process their focus is often on outlining the activities that must be done and not on describing how they should be done. While there is some research in addressing how to carry out the various tasks in the phases, the data preparation phase is thought to be the most challenging and is often described as an art rather than a science. In this study we apply a multi-phased integrated knowledge discovery and data mining process model (IKDDM) to a data set from the financial sector and a present a new approach to data preparation for Sequential Patterns (SP) that facilitated the identification of customer focused patterns rather than products focussed patterns in the modelling phase

Comparing Decision Trees and Association Rules for Stock Market Expectations in BIST100 and BIST30

With the increased financial fragility, methods have been needed to predict financial data effectively. In this study, two leading data mining technologies, classification analysis and association rule mining, are implemented for modeling potentially successful and risky stocks on the BIST 30 index and BIST 100 Index based on the key variables of index name, index value, and stock price. Classification and Regression Tree (CART) is used for classification, and Apriori is applied for association analysis. The study data set covered monthly closing values during 2013-2019. The Apriori algorithm also obtained almost all of the classification rules generated with the CART algorithm. Validated by two promising data mining techniques, proposed rules guide decision-makers in their investment decisions. By providing early warning signals of risky stocks, these rules can be used to minimize risk levels and protect decision-makers from making risky decisions

Development of an intelligent analytics-based model for product sales optimisation in retail enterprises

A retail enterprise is a business organisation that sells goods or services directly to consumers for personal use. Retail enterprises such as supermarkets enable customers to go around the shop picking items from the shelves and placing them into their baskets. The basket of each customer is captured into transactional systems. In this research study, retail enterprises were classified into two main categories: centralised and distributed retail enterprises. A distributed retail enterprise is one that issues the decision rights to the branches or groups nearest to the data collection, while in centralised retail enterprises the decision rights of the branches are concentrated in a single authority. It is difficult for retail enterprises to ascertain customer preferences by merely observing transactions. This has led to quantifiable losses. Although some enterprises implemented classical business models to address these challenging issues, they still lacked analytics-based marketing programs to gain competitive advantage. This research study develops an intelligent analytics-based (ARANN) model for both distributed and centralised retail enterprises in the cross-demographics of a developing country. The ARANN model is built on association rules (AR), complemented by artificial neural networks (ANN) to strengthen the results of these two individual models. The ARANN model was tested using real-life and publicly available transactional datasets for the generation of product arrangement sets. In centralised retail enterprises, the data from different branches was integrated and pre-processed to remove data impurities. The cleaned data was then fed into the ARANN model. On the other hand, in distributed retail enterprises data was collected branch per branch and cleaned. The cleaned data was fed into the ARANN model. According to experimental analytics, the ARANN model can generate improved product arrangement sets, thereby improving the confidence of retail enterprise decision-makers in competitive environments. It was also observed that the ARANN model performed faster in distributed than in centralised retail enterprises. This research is beneficial for sustainable businesses and consideration of the results is therefore recommended to retail enterprises.ComputingM Sc. (Computing

Essays on Financial Applications of Nonlinear Models

In this thesis, we examine the relationship between news and the stock market. Further, we explore methods and build new nonlinear models for forecasting stock price movement and portfolio optimization based on past stock prices and on one type of big data, news items, which are obtained through the RavenPack News Analytics Global Equities editions. The thesis consists of three essays. In Essay 1, we investigate the relationship between news items and stock prices using the artificial neural network (ANN) model. First, we use Granger causality to ascertain how news items affect stock prices. The results show that news volume is not the Granger cause of stock price change; rather, news sentiment is. Second, we test the semi–strong form efficient market hypothesis, whereas most existing research testing efficient market hypothesis focuses on the weak–form version. Our ANN strategies consistently outperform the passive buy–and–hold strategy and this finding is apparently at odds with the notion of the efficient market hypothesis. Finally, using news sentiment analytics from RavenPack Dow Jones News Analytics, we show positive profitability with out–of–sample prediction using the proposed ANN strategies for Google Inc. (NASDAQ: GOOG). In Essay 2, we expand the utility of the information from news volume and news sentiments to encompass portfolio diversification. For the Dow Jones Industrial Average (DJIA) components, we assign different weights to build portfolios according to their weekly news volumes or news sentiments. Our results show that news volume contributes to portfolio variance both in–sample and out–of–sample: positive news sentiment contributes to the portfolio return in–sample, while negative contributes to the portfolio return out–of–sample, which is a consequence of investors overreacting to the news sentiment. Further, we propose a novel approach to portfolio diversification using the k–Nearest Neighbors (kNN) algorithm based on the idea that news sentiment correlates with stock returns. Out–of–sample results indicate that such strategy dominates the benchmark DJIA index portfolio. In Essay 3, we propose a new model called the Combined Markov and Hidden Markov Model (CMHMM), in which observation is affected by a Markov model and an HMM (Hidden Markov Model) model. The three fundamental questions of the CMHMM are discussed. Further, the application of the CMHMM, in which the news sentiment is one observation and the stock return is the other, is discussed. The empirical results of the trading strategy based on the CMHMM show the potential applications of the proposed model in finance. This thesis contributes to the literature in a number of ways. First, it extends the literature on financial applications of nonlinear models. We explore the applications of the ANNs and kNN in the financial market. Besides, the proposed new CMHMM model adheres to the nature of the stock market and has better potential prediction ability. Second, the empirical results from this dissertation contribute to the understanding of the relationship between news and the stock market. For instance, our research found that news volume contributes to the portfolio return and that investors overreact to news sentiment—a phenomenon that has been discussed by other scholars from different angles

Collaborative-demographic hybrid for financial: product recommendation

Internship Report presented as the partial requirement for obtaining a Master's degree in Data Science and Advanced AnalyticsDue to the increased availability of mature data mining and analysis technologies supporting CRM processes, several financial institutions are striving to leverage customer data and integrate insights regarding customer behaviour, needs, and preferences into their marketing approach. As decision support systems assisting marketing and commercial efforts, Recommender Systems applied to the financial domain have been gaining increased attention. This thesis studies a Collaborative- Demographic Hybrid Recommendation System, applied to the financial services sector, based on real data provided by a Portuguese private commercial bank. This work establishes a framework to support account managers’ advice on which financial product is most suitable for each of the bank’s corporate clients. The recommendation problem is further developed by conducting a performance comparison for both multi-output regression and multiclass classification prediction approaches. Experimental results indicate that multiclass architectures are better suited for the prediction task, outperforming alternative multi-output regression models on the evaluation metrics considered. Withal, multiclass Feed-Forward Neural Networks, combined with Recursive Feature Elimination, is identified as the topperforming algorithm, yielding a 10-fold cross-validated F1 Measure of 83.16%, and achieving corresponding values of Precision and Recall of 84.34%, and 85.29%, respectively. Overall, this study provides important contributions for positioning the bank’s commercial efforts around customers’ future requirements. By allowing for a better understanding of customers’ needs and preferences, the proposed Recommender allows for more personalized and targeted marketing contacts, leading to higher conversion rates, corporate profitability, and customer satisfaction and loyalty