Finding kernel function for stock market prediction with support vector regression

Stock market prediction is one of the fascinating issues of stock market research. Accurate stock prediction becomes the biggest challenge in investment industry because the distribution of stock data is changing over the time. Time series forcasting, Neural Network (NN) and Support Vector Machine (SVM) are once commonly used for prediction on stock price. In this study, the data mining operation called time series forecasting is implemented. The large amount of stock data collected from Kuala Lumpur Stock Exchange is used for the experiment to test the validity of SVMs regression. SVM is a new machine learning technique with principle of structural minimization risk, which have greater generalization ability and proved success in time series prediction. Two kernel functions namely Radial Basis Function and polynomial are compared for finding the accurate prediction values. Besides that, backpropagation neural network are also used to compare the predictions performance. Several experiments are conducted and some analyses on the experimental results are done. The results show that SVM with polynomial kernels provide a promising alternative tool in KLSE stock market prediction

Forecasting Long-Term Government Bond Yields: An Application of Statistical and AI Models

This paper evaluates several artificial intelligence and classical algorithms on their ability of forecasting the monthly yield of the US 10-year Treasury bonds from a set of four economic indicators. Due to the complexity of the prediction problem, the task represents a challenging test for the algorithms under evaluation. At the same time, the study is of particular significance for the important and paradigmatic role played by the US market in the world economy. Four data-driven artificial intelligence approaches are considered, namely, a manually built fuzzy logic model, a machine learned fuzzy logic model, a self-organising map model and a multi-layer perceptron model. Their performance is compared with the performance of two classical approaches, namely, a statistical ARIMA model and an econometric error correction model. The algorithms are evaluated on a complete series of end-month US 10-year Treasury bonds yields and economic indicators from 1986:1 to 2004:12. In terms of prediction accuracy and reliability of the modelling procedure, the best results are obtained by the three parametric regression algorithms, namely the econometric, the statistical and the multi-layer perceptron model. Due to the sparseness of the learning data samples, the manual and the automatic fuzzy logic approaches fail to follow with adequate precision the range of variations of the US 10-year Treasury bonds. For similar reasons, the self-organising map model gives an unsatisfactory performance. Analysis of the results indicates that the econometric model has a slight edge over the statistical and the multi-layer perceptron models. This suggests that pure data-driven induction may not fully capture the complicated mechanisms ruling the changes in interest rates. Overall, the prediction accuracy of the best models is only marginally better than the prediction accuracy of a basic one-step lag predictor. This result highlights the difficulty of the modelling task and, in general, the difficulty of building reliable predictors for financial markets.interest rates; forecasting; neural networks; fuzzy logic.

Review on Financial Forecasting using Neural Network and Data Mining Technique

The rise of economic globalization and evolution of information technology, financial data are being generated and accumulated at an extraordinary speed. As a result, there has been a critical need for automated approaches to effective and efficient utilization of massive amount of financial data to support companies and individuals in strategic planning and investment decision-making. The competitive advantages achieved by data mining include increased revenue, reduced cost, and much improved marketplace responsiveness and awareness. There has been a large body of research and practice focusing on exploring data mining techniques to solve financial problems. This paper describes data mining in the context of financial application from both technical and application perspective by comparing different data mining techniques