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Stock Price Prediction Using FinBERT-Enhanced Sentiment with SHAP Explainability and Differential Privacy

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  • Linyan Ruan

    (School of International Trade and Economics, Central University of Finance and Economics, Beijing 102206, China)

  • Haiwei Jiang

    (School of International Trade and Economics, Central University of Finance and Economics, Beijing 102206, China)

Abstract

Stock price forecasting remains a central challenge in financial modeling due to the non-stationarity, noise, and high dimensionality of market dynamics, as well as the growing importance of unstructured textual information. In this work, we propose a multimodal prediction framework that combines FinBERT-based financial sentiment extraction with technical and statistical indicators to forecast short-term stock price movement. Contextual sentiment signals are derived from financial news headlines using FinBERT, a domain-specific transformer model fine-tuned on annotated financial text. These signals are aggregated and fused with price- and volatility-based features, forming the input to a gradient-boosted decision tree classifier (XGBoost). To ensure interpretability, we employ SHAP (SHapley Additive exPlanations), which decomposes each prediction into additive feature attributions while satisfying game-theoretic fairness axioms. In addition, we integrate differential privacy into the training pipeline to ensure robustness against membership inference attacks and protect proprietary or client-sensitive data. Empirical evaluations across multiple S&P 500 equities from 2018–2023 demonstrate that our FinBERT-enhanced model consistently outperforms both technical-only and lexicon-based sentiment baselines in terms of AUC, F1-score, and simulated trading profitability. SHAP analysis confirms that FinBERT-derived features rank among the most influential predictors. Our findings highlight the complementary value of domain-specific NLP and privacy-preserving machine learning in financial forecasting, offering a principled, interpretable, and deployable solution for real-world quantitative finance applications.

Suggested Citation

  • Linyan Ruan & Haiwei Jiang, 2025. "Stock Price Prediction Using FinBERT-Enhanced Sentiment with SHAP Explainability and Differential Privacy," Mathematics, MDPI, vol. 13(17), pages 1-22, August.
  • Handle: RePEc:gam:jmathe:v:13:y:2025:i:17:p:2747-:d:1733041
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