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LSTM forecasting foreign exchange rates using limit order book

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  • Ito, Katsuki
  • Iima, Hitoshi
  • Kitamura, Yoshihiro

Abstract

We use long and short term memory (LSTM) to predict intraday returns in foreign exchange markets. As predictors, we use events in the limit order book. Compared to other models, our model predicts the movement of a 1-min midquote return. When we consider the bid-ask spread, this prediction does not bring economic gains. This result indicates that these events can contribute to price discovery and the studied markets efficiently set the spread.

Suggested Citation

  • Ito, Katsuki & Iima, Hitoshi & Kitamura, Yoshihiro, 2022. "LSTM forecasting foreign exchange rates using limit order book," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321004827
    DOI: 10.1016/j.frl.2021.102517
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    References listed on IDEAS

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    Cited by:

    1. Qifa Xu & Zezhou Wang & Cuixia Jiang & Yezheng Liu, 2023. "Deep learning on mixed frequency data," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(8), pages 2099-2120, December.

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