Natural Language Financial Forecasting: The South African Context

The stock market plays a fundamental role in any country's economy as it efficiently directs the flow of savings and investments of an economy in ways that advances the accumulation of capital and the production of goods and services. Factors that affect the price movement of stocks include company news and performance, macroeconomic factors, market sentiment as well as unforeseeable events. The conventional prediction approach is based on historical numerical data such as price trends and trading volumes to name a few. This thesis reviews the literature of Natural Language Financial Forecasting (NLFF) and proposes novel implementation techniques with the use of Stock Exchange News Service (SENS) announcements to predict stock price trends with machine learning methods. Deep Learning has recently sparked interest in the data science communities, but the literature on the application of deep learning in stock prediction, especially in emerging markets like South Africa, is still limited. In this thesis, the process of labelling announcements, the use of a more statistically relevent technique called the event study was used. Classical textual preprocessing and representation techniques were replaced with state-of-the-art sentence embeddings. Deep learning models (Deep Neural Network (DNN)) were then compared to Classical Models (Logistic Regression (LR)). These models were trained, optimized and deployed using the Tensorflow Machine Learning (ML) framework on Google Cloud AI Platform. The comparison between the performance results of the models shows that both DNN and LR have potential operational capabilites to use information dissemination as a means to assist market participants with their trading decisions

STOCK MARKET PREDICTION USING ENSEMBLE OF GRAPH THEORY, MACHINE LEARNING AND DEEP LEARNING MODELS

Efficient Market Hypothesis (EMH) is the cornerstone of the modern financial theory and it states that it is impossible to predict the price of any stock using any trend, fundamental or technical analysis. Stock trading is one of the most important activities in the world of finance. Stock price prediction has been an age-old problem and many researchers from academia and business have tried to solve it using many techniques ranging from basic statistics to machine learning using relevant information such as news sentiment and historical prices. Even though some studies claim to get prediction accuracy higher than a random guess, they consider nothing but a proper selection of stocks and time interval in the experiments. In this project, a novel approach is proposed using graph theory. This approach leverages Spatio- temporal relationship information between different stocks by modeling the stock market as a complex network. This graph-based approach is used along with two techniques to create two hybrid models. Two different types of graphs are constructed, one from the correlation of the historical stock prices and the other is a causation-based graph constructed from the financial news mention of that stock over a period. The first hybrid model leverages deep learning convolutional neural networks and the second model leverages a traditional machine learning approach. These models are compared along with other statistical models and the advantages and disadvantages of graph-based models are discussed. Our experiments conclude that both graph-based approaches perform better than the traditional approaches since they leverage structural information while building the prediction model

Deep Learning Approaches for Big Data Analysis

Good representations of data eliminate irrelevant variability of the input data, while preserving the information that is useful for the ultimate task. Among the various ways for learning representation is using deep learning methods. Deep feature hierarchies are formed by stacking unsupervised modules on top of each other, forming multiple non-linear transformations to produce better representations. In this talk, we will first show how deep learning is used for bioactivity prediction of chemical compounds. Molecules are represented as several convolutional neural networks to predict their bioactivity. In addition, a new concept of merging multiple convolutional neural networks and an automatic learning features representation for the chemical compounds was proposed using the values within neurons of the last layer of the CNN architecture. We will also show how the concepts of deep learning is adapted into a deep belief network (DBN) to enhance the molecular similarity searching. The DBN achieves feature abstraction by reconstruction weight for each feature and minimizing the reconstruction error over the whole feature set. The DBN is later enhanced using data fusion to obtain a lower detection error probability and a higher reliability by using data from multiple distributed descriptors. Secondly, we will show how we used deep learning for stock market prediction. Here, we developed a Deep Long Short Term Memory Network model that is able to forecast the crude palm oil price movement with combined factors such as other commodities prices, weather and news sentiments and price movement of crude palm oil. We will also show how we combined stock markets price and financial news and deployed the Long Short Term Memory (LSTM), Recurrent Neural Network (RNN), and Word 2 Vector (Word2Vec) to project the stock prices for the following seven days. Finally, we will show how we exploited deep learning method for the opinion mining and later used it to extract the product's aspects from the user textual review for recommendation systems. Specifically, we employ a multichannel convolutional neural network (MCNN) for two different input layers, namely, word embedding layer and Part-of-speech (POS) tag embedding layer. We will show effectiveness of the proposed model in terms of both aspect extraction and rating prediction performance

Using financial news for stock price direction prediction : an empirical investigation

The semi-strong form of financial market efficiency states that asset prices reflect all publicly available information. Consequently, natural language processing methods can be used to extract the market sentiment from the information such as the news. However, traditional natural language processing methods have the disadvantage that some information such as the context of words or the structure of sentences get lost. The purpose of this master thesis is to extract the sentiment of the financial markets from news articles and to use the estimated sentiment scores to predict the price direction of the stock market index Standard & Poor's 500. To overcome the drawbacks of traditional natural language methods, state-of-the-art natural language processing models based on the Transformer architecture are used in this master thesis. To enable the best possible classification performance of sentiment scores, state-of-the-art bidirectional encoder representations from transformers (BERT) models are used. The pretrained transformer networks are fine-tuned on a labeled financial dataset to be able to estimate the sentiment of the financial markets. After fine-tuning the models, they are applied to news articles from Bloomberg and Reuters to predict the sentiment score of the news. To forecast the price direction of the stock market index, the predicted sentiment scores are fed into a machine learning model. Thereby, the sentiment scores of the titles, the content, and their sentiment scores combined with past time series information of the stock market index are used as input. The results indicate that the use of sentiment scores generated from news content can be used for stock price direction prediction. The use of sentiment scores extracted from the titles or the combination of sentiment scores from the titles and the content does not improve the quality of the prediction. Based on the findings of this master thesis, it can be concluded that the sentiment scores can be used for the prediction of the stock price direction. For further research in this area, the author of this master thesis recommends using recurrent deep learning models. Due to their internal state, these deep learning models have a memory that can be useful for predicting stock price directions. Practical recommendations are that the sentiment scores can be used in a risk-based approach as a complement to the calculation of the value at risk or the expected shortfall

Enhanced news sentiment analysis using deep learning methods

We explore the predictive power of historical news sentiments based on financial market performance to forecast financial news sentiments. We define news sentiments based on stock price returns averaged over one minute right after a news article has been released. If the stock price exhibits positive (negative) return, we classify the news article released just prior to the observed stock return as positive (negative). We use Wikipedia and Gigaword five corpus articles from 2014 and we apply the global vectors for word representation method to this corpus to create word vectors to use as inputs into the deep learning TensorFlow network. We analyze high-frequency (intraday) Thompson Reuters News Archive as well as the high-frequency price tick history of the Dow Jones Industrial Average (DJIA 30) Index individual stocks for the period between 1/1/2003 and 12/30/2013. We apply a combination of deep learning methodologies of recurrent neural network with long short-term memory units to train the Thompson Reuters News Archive Data from 2003 to 2012, and we test the forecasting power of our method on 2013 News Archive data. We find that the forecasting accuracy of our methodology improves when we switch from random selection of positive and negative news to selecting the news with highest positive scores as positive news and news with highest negative scores as negative news to create our training data set.Published versio

A Novel Distributed Representation of News (DRNews) for Stock Market Predictions

In this study, a novel Distributed Representation of News (DRNews) model is developed and applied in deep learning-based stock market predictions. With the merit of integrating contextual information and cross-documental knowledge, the DRNews model creates news vectors that describe both the semantic information and potential linkages among news events through an attributed news network. Two stock market prediction tasks, namely the short-term stock movement prediction and stock crises early warning, are implemented in the framework of the attention-based Long Short Term-Memory (LSTM) network. It is suggested that DRNews substantially enhances the results of both tasks comparing with five baselines of news embedding models. Further, the attention mechanism suggests that short-term stock trend and stock market crises both receive influences from daily news with the former demonstrates more critical responses on the information related to the stock market {\em per se}, whilst the latter draws more concerns on the banking sector and economic policies.Comment: 25 page