FINANCIAL RATIO ANALYSIS FOR STOCK PRICE MOVEMENT PREDICTION USING HYBRID CLUSTERING

We have gathered over 3100 annual financial reports for 500 companies listed on the S&P 500 index, where the main goal was to select and give proper weights to the various pieces of quantitative data to maximize clustering results and improve prediction results over previous work by [Lin et al. 2011]. Various financial ratios, including earnings per share surprise percentages were gathered and analyzed. We proposed and used two types, correlation based ratios and causality based ratios. An extension to the classification scheme used by [Lin et al. 2011] was proposed to more accurately classify financial reports, together with a more outlier- tolerant normalization technique. We proved that our proposed data scaling/normalization method is superior to the method used by [Lin et al. 2011]. We heavily focused on the relative importance of various financial ratios. We proposed a new method for determining the relative importance of the various financial ratios, and showed that the resulting weights aligned with theoretical expectations. Using this new weighing scheme, we were able to achieve superior cluster purities as compared to the method proposed by [Lin et al. 2011]. Achieving higher cluster purity in initial stages of analysis lead to minimized over-fitting by a modified version of K-Means, and overall better prediction accuracy on average

An Effective Clustering Approach to Stock Market Prediction

In this paper, we propose an effective clustering method, HRK (Hierarchical agglomerative and Recursive K-means clustering), to predict the short-term stock price movements after the release of financial reports. The proposed method consists of three phases. First, we convert each financial report into a feature vector and use the hierarchical agglomerative clustering method to divide the converted feature vectors into clusters. Second, for each cluster, we recursively apply the K-means clustering method to partition each cluster into sub-clusters so that most feature vectors in each sub-cluster belong to the same class. Then, for each sub-cluster, we choose its centroid as the representative feature vector. Finally, we employ the representative feature vectors to predict the stock price movements. The experimental results show the proposed method outperforms SVM in terms of accuracy and average profits

Predicting Stock Price Movement Direction with Enterprise Knowledge Graph

Predicting stock price movement direction is a challenging task for financial investment. Previous researches focused on investigating the impacts of external factors (e.g., big events, economic influence and sentiments) in combination with the historical price to predict short-term stock price movement, while few researches leveraged the power of various relationships among enterprises. To bridge this gap, this research proposes power vector model and influence propagation model to mine the rich information in constructed Enterprise Knowledge Graph (EKG) for price movement prediction. In addition, Deep Neural Network (DNN) is introduced to train the model. The proposed model shows good prediction performance on the dataset of China top 500 enterprises

Adaptive Algorithms For Classification On High-Frequency Data Streams: Application To Finance

Mención Internacional en el título de doctorIn recent years, the problem of concept drift has gained importance in the financial domain. The succession of manias, panics and crashes have stressed the nonstationary nature and the likelihood of drastic structural changes in financial markets. The most recent literature suggests the use of conventional machine learning and statistical approaches for this. However, these techniques are unable or slow to adapt to non-stationarities and may require re-training over time, which is computationally expensive and brings financial risks. This thesis proposes a set of adaptive algorithms to deal with high-frequency data streams and applies these to the financial domain. We present approaches to handle different types of concept drifts and perform predictions using up-to-date models. These mechanisms are designed to provide fast reaction times and are thus applicable to high-frequency data. The core experiments of this thesis are based on the prediction of the price movement direction at different intraday resolutions in the SPDR S&P 500 exchange-traded fund. The proposed algorithms are benchmarked against other popular methods from the data stream mining literature and achieve competitive results. We believe that this thesis opens good research prospects for financial forecasting during market instability and structural breaks. Results have shown that our proposed methods can improve prediction accuracy in many of these scenarios. Indeed, the results obtained are compatible with ideas against the efficient market hypothesis. However, we cannot claim that we can beat consistently buy and hold; therefore, we cannot reject it.Programa de Doctorado en Ciencia y Tecnología Informática por la Universidad Carlos III de MadridPresidente: Gustavo Recio Isasi.- Secretario: Pedro Isasi Viñuela.- Vocal: Sandra García Rodrígue

Text Mining for Studying Management’s Confidence in IPO Prospectuses and IPO Valuations

Understanding pricing strategies in the context of the Initial Public Offering (IPO) process has been receiving much attention. Most prior studies have however focused on information sources from post issuance periods, and understanding such strategies from the management’s perspective during the IPO process is still an open research issue. Form 424 variants, as finalized IPO prospectus approved by Security Exchange Committee (SEC), contain rich and genuine information about the issuing firms. In this study, we analyze the inter-relationships between the management’s confidence (through the proxy of sentiments expressed in textual contents in the Management’s Discussion & Analysis (MD&A) sections in the prospectus) and the pre-/post-IPO valuations. We develop an analytical framework namely FOCAS-IE (Feature-Oriented, Context-Aware, Systematic Information Extraction) to derive sentiments from the MD&A sections. Further, we construct predictive models using information extracted using FOCAS-IE to predict IPO pricings. The results have shown to outperform results from prior related studies

Analysis of S&P500 using News Headlines Applying Machine Learning Algorithms

Dissertation presented as the partial requirement for obtaining a Master's degree in Information Management, specialization in Knowledge Management and Business IntelligenceFinancial risk is in everyone’s life now, directly or indirectly impacting people´s daily life, empowering people on their decisions and the consequences of the same. This financial system comprises all the companies that produce and sell, making them an essential factor. This study addresses the impact people can have, by the news headlines written, on companies’ stock prices. S&P 500 is the index that will be studied in this research, compiling the biggest 500 companies in the USA and how the index can be affected by the News Articles written by humans from distinct and powerful Newspapers. Many people worldwide “play the game” of investing in stock prices, winning or losing much money. This study also tries to understand how strongly this news and the Index, previously mentioned, can be correlated. With the increased data available, it is necessary to have some computational power to help process all of this data. There it is when the machine learning methods can have a crucial involvement. For this is necessary to understand how these methods can be applied and influence the final decision of the human that always has the same question: Can stock prices be predicted? For that is necessary to understand first the correlation between news articles, one of the elements able to impact the stock prices, and the stock prices themselves. This study will focus on the correlation between News and S&P 500

An academic review: applications of data mining techniques in finance industry

With the development of Internet techniques, data volumes are doubling every two years, faster than predicted by Moore’s Law. Big Data Analytics becomes particularly important for enterprise business. Modern computational technologies will provide effective tools to help understand hugely accumulated data and leverage this information to get insights into the finance industry. In order to get actionable insights into the business, data has become most valuable asset of financial organisations, as there are no physical products in finance industry to manufacture. This is where data mining techniques come to their rescue by allowing access to the right information at the right time. These techniques are used by the finance industry in various areas such as fraud detection, intelligent forecasting, credit rating, loan management, customer profiling, money laundering, marketing and prediction of price movements to name a few. This work aims to survey the research on data mining techniques applied to the finance industry from 2010 to 2015.The review finds that Stock prediction and Credit rating have received most attention of researchers, compared to Loan prediction, Money Laundering and Time Series prediction. Due to the dynamics, uncertainty and variety of data, nonlinear mapping techniques have been deeply studied than linear techniques. Also it has been proved that hybrid methods are more accurate in prediction, closely followed by Neural Network technique. This survey could provide a clue of applications of data mining techniques for finance industry, and a summary of methodologies for researchers in this area. Especially, it could provide a good vision of Data Mining Techniques in computational finance for beginners who want to work in the field of computational finance

An artifact based approach to the accounting recognition of assets, particularly intangible assets

The International Accounting Standards Board is currently reviewing its conceptual framework and, as regards assets, the epistemological focus is upon revisions to the definition of an asset. The asset recognition criteria presented in this paper break free from this narrow definitional perspective to offer an alternative view based on the recognition of artifacts and the related notion of separability

Convolution on neural networks for high-frequency trend prediction of cryptocurrency exchange rates using technical indicators

This study explores the suitability of neural networks with a convolutional component as an alternative to traditional multilayer perceptrons in the domain of trend classification of cryptocurrency exchange rates using technical analysis in high frequencies. The experimental work compares the performance of four different network architectures -convolutional neural network, hybrid CNN-LSTM network, multilayer perceptron and radial basis function neural network- to predict whether six popular cryptocurrencies -Bitcoin, Dash, Ether, Litecoin, Monero and Ripple- will increase their value vs. USD in the next minute. The results, based on 18 technical indicators derived from the exchange rates at a one-minute resolution over one year, suggest that all series were predictable to a certain extent using the technical indicators. Convolutional LSTM neural networks outperformed all the rest significantly, while CNN neural networks were also able to provide good results specially in the Bitcoin, Ether and Litecoin cryptocurrencies.We would also like to acknowledge the financial support of the Spanish Ministry of Science, Innovation and Universities under grant PGC2018-096849-B-I00 (MCFin