Modeling Financial Time Series with Artificial Neural Networks

Financial time series convey the decisions and actions of a population of human actors over time. Econometric and regressive models have been developed in the past decades for analyzing these time series. More recently, biologically inspired artificial neural network models have been shown to overcome some of the main challenges of traditional techniques by better exploiting the non-linear, non-stationary, and oscillatory nature of noisy, chaotic human interactions. This review paper explores the options, benefits, and weaknesses of the various forms of artificial neural networks as compared with regression techniques in the field of financial time series analysis.CELEST, a National Science Foundation Science of Learning Center (SBE-0354378); SyNAPSE program of the Defense Advanced Research Project Agency (HR001109-03-0001

On stock return prediction with LSTM networks

Artificial neural networks are, again, on the rise. The decreasing costs of computing power and the availability of big data together with advancements of neural network theory have made this possible. In this thesis, LSTM (long short-term memory) recurrent neural networks are used in order to perform financial time series forecasting on return data of three stock indices. The indices are S&P 500 in the US, Bovespa 50 in Brazil and OMX 30 in Sweden. The results show that the outputs of the LSTM networks are very similar to those of a conventional time series model, namely an ARMA(1,1)-GJRGARCH(1,1), when a regression approach is taken. However, they outperform the time series model with regards to direction of change classification. The thesis shows significant results for direction of change classification for the small Swedish market, and insignificant results for the large US market and the emerging Brazilian market. When a trading strategy is implemented based on the direction of change, a deep LSTM network vastly outperforms the time series model

SELECTING NEURAL NETWORK ARCHITECTURE FOR INVESTMENT PROFITABILITY PREDICTIONS

After production and operations, finance and investments are one of the most frequent areas of neural network applications in business. The lack of standardized paradigms that can determine the efficiency of certain NN architectures in a particular problem domain is still present. The selection of NN architecture needs to take into consideration the type of the problem, the nature of the data in the model, as well as some strategies based on result comparison. The paper describes previous research in that area and suggests a forward strategy for selecting best NN algorithm and structure. Since the strategy includes both parameter-based and variable-based testings, it can be used for selecting NN architectures as well as for extracting models. The backpropagation, radialbasis, modular, LVQ and probabilistic neural network algorithms were used on two independent sets: stock market and credit scoring data. The results show that neural networks give better accuracy comparing to multiple regression and logistic regression models. Since it is model-independant, the strategy can be used by researchers and professionals in other areas of application

Yapay sinir ağları modelleri ile İMKB - 100 endeksinin günlük ve seanslık getirilerinin tahmin edilmesi

Especially for the last decade, the neural network models have been applied to solve financial problems like portfolio construction and stock market forecasting. Among the alternative neural network models, the multilayer perceptron models are expected to be effective and widely applied in financial forecasting. This study examines the forecasting power multilayer perceptron models for daily and sessional returns of ISE-100 index. The findings imply that the multilayer perceptron models presented promising performance in forecasting the ISE-100 index returns. However, further emphasis should be placed on different input variables and model architectures in order to improve the forecasting performances.Özellikle son on yılda yapay sinir ağları modelleri portföy oluşturma ve hisse senedi piyasası tahminleri gibi finansal problemleri çözmede uygulanmaktadır. Çeşitli yapay sinir ağları modelleri arasında, çok-katmanlı pörseptron modelleri finansal tahmin çalışmaları için yaygın ve etkili bir şekilde kullanılmaktadır. Bu çalışma, çok-katmanlı pörseptron modellerinin İMKB-100 endeksinin günlük ve seanslık getirilerinin tahmin edilmesindeki etkinliğini incelemektedir. Çalışmanın bulgularından yola çıkılarak, çok-katmanlı pörseptron modellerinin İMKB-100 endeks getirisini tahmin etmede umut vaat eden bir performans gösterdiği sonucuna varılabilir. Fakat, yapay sinir ağları modellerinin tahmin güçleri farklı değişkenler ve farklı model yapıları kullanılarak daha da arttırılabilir

Forecasting Daily and Sessional Returns of the ISE - 100 Index with Neural Network Models

Özellikle son on yılda yapay sinir ağları modelleri portföy oluşturma ve hisse senedi piyasası tahminleri gibi finansal problemleri çözmede uygulanmaktadır. Çeşitli yapay sinir ağları modelleri arasında, çok-katmanlı pörseptron modelleri finansal tahmin çalışmaları için yaygın ve etkili bir şekilde kullanılmaktadır. Bu çalışma, çok-katmanlı pörseptron modellerinin İMKB-100 endeksinin günlük ve seanslık getirilerinin tahmin edilmesindeki etkinliğini incelemektedir. Çalışmanın bulgularından yola çıkılarak, çok-katmanlı pörseptron modellerinin İMKB-100 endeks getirisini tahmin etmede umut vaat eden bir performans gösterdiği sonucuna varılabilir. Fakat, yapay sinir ağları modellerinin tahmin güçleri farklı değişkenler ve farklı model yapıları kullanılarak daha da arttırılabilir.Especially for the last decade, the neural network models have been applied to solve financial problems like portfolio construction and stock market forecasting. Among the alternative neural network models, the multilayer perceptron models are expected to be effective and widely applied in financial forecasting. This study examines the forecasting power multilayer perceptron models for daily and sessional returns of ISE-100 index. The findings imply that the multilayer perceptron models presented promising performance in forecasting the ISE-100 index returns. However, further emphasis should be placed on different input variables and model architectures in order to improve the forecasting performances

Forecasting Daily and Sessional Returns of the ISE - 100 Index with Neural Network Models

Özellikle son on yılda yapay sinir ağları modelleri portföy oluşturma ve hisse senedi piyasası tahminleri gibi finansal problemleri çözmede uygulanmaktadır. Çeşitli yapay sinir ağları modelleri arasında, çok-katmanlı pörseptron modelleri finansal tahmin çalışmaları için yaygın ve etkili bir şekilde kullanılmaktadır. Bu çalışma, çok-katmanlı pörseptron modellerinin İMKB-100 endeksinin günlük ve seanslık getirilerinin tahmin edilmesindeki etkinliğini incelemektedir. Çalışmanın bulgularından yola çıkılarak, çok-katmanlı pörseptron modellerinin İMKB-100 endeks getirisini tahmin etmede umut vaat eden bir performans gösterdiği sonucuna varılabilir. Fakat, yapay sinir ağları modellerinin tahmin güçleri farklı değişkenler ve farklı model yapıları kullanılarak daha da arttırılabilir.Especially for the last decade, the neural network models have been applied to solve financial problems like portfolio construction and stock market forecasting. Among the alternative neural network models, the multilayer perceptron models are expected to be effective and widely applied in financial forecasting. This study examines the forecasting power multilayer perceptron models for daily and sessional returns of ISE-100 index. The findings imply that the multilayer perceptron models presented promising performance in forecasting the ISE-100 index returns. However, further emphasis should be placed on different input variables and model architectures in order to improve the forecasting performances

Modelling and trading the Greek stock market with gene expression and genetic programing algorithms

This paper presents an application of the gene expression programming (GEP) and integrated genetic programming (GP) algorithms to the modelling of ASE 20 Greek index. GEP and GP are robust evolutionary algorithms that evolve computer programs in the form of mathematical expressions, decision trees or logical expressions. The results indicate that GEP and GP produce significant trading performance when applied to ASE 20 and outperform the well-known existing methods. The trading performance of the derived models is further enhanced by applying a leverage filter