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An ensemble of LSTM neural networks for high‐frequency stock market classification

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  • Svetlana Borovkova
  • Ioannis Tsiamas

Abstract

We propose an ensemble of long–short‐term memory (LSTM) neural networks for intraday stock predictions, using a large variety of technical analysis indicators as network inputs. The proposed ensemble operates in an online way, weighting the individual models proportionally to their recent performance, which allows us to deal with possible nonstationarities in an innovative way. The performance of the models is measured by area under the curve of the receiver operating characteristic. We evaluate the predictive power of our model on several US large‐cap stocks and benchmark it against lasso and ridge logistic classifiers. The proposed model is found to perform better than the benchmark models or equally weighted ensembles.

Suggested Citation

  • Svetlana Borovkova & Ioannis Tsiamas, 2019. "An ensemble of LSTM neural networks for high‐frequency stock market classification," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 38(6), pages 600-619, September.
    • Handle: RePEc:wly:jforec:v:38:y:2019:i:6:p:600-619
    DOI: 10.1002/for.2585
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    Citations

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    Cited by:

    1. Gil Cohen, 2022. "Artificial Intelligence in Trading the Financial Markets," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 101-110.
    2. Yuanrong Wang & Yinsen Miao & Alexander CY Wong & Nikita P Granger & Christian Michler, 2023. "Domain-adapted Learning and Interpretability: DRL for Gas Trading," Papers 2301.08359, arXiv.org, revised Sep 2023.
    3. Flori, Andrea & Regoli, Daniele, 2021. "Revealing Pairs-trading opportunities with long short-term memory networks," European Journal of Operational Research, Elsevier, vol. 295(2), pages 772-791.
    4. Hussain, Syed Mujahid & Ahmad, Nisar & Ahmed, Sheraz, 2023. "Applications of high-frequency data in finance: A bibliometric literature review," International Review of Financial Analysis, Elsevier, vol. 89(C).
    5. Vecchi, Edoardo & Berra, Gabriele & Albrecht, Steffen & Gagliardini, Patrick & Horenko, Illia, 2023. "Entropic approximate learning for financial decision-making in the small data regime," Research in International Business and Finance, Elsevier, vol. 65(C).
    6. Ao Kong & Hongliang Zhu & Robert Azencott, 2019. "Predicting intraday jumps in stock prices using liquidity measures and technical indicators," Papers 1912.07165, arXiv.org.
    7. Lu, Xinjie & Ma, Feng & Xu, Jin & Zhang, Zehui, 2022. "Oil futures volatility predictability: New evidence based on machine learning models11All the authors contribute to the paper equally," International Review of Financial Analysis, Elsevier, vol. 83(C).
    8. Tölö, Eero, 2020. "Predicting systemic financial crises with recurrent neural networks," Journal of Financial Stability, Elsevier, vol. 49(C).
    9. Gil, Cohen, 2022. "Intraday Trading of Precious Metals Futures Using Algorithmic Systems," Chaos, Solitons & Fractals, Elsevier, vol. 154(C).
    10. Yan, Wan-Lin, 2023. "Stock index futures price prediction using feature selection and deep learning," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    11. Firuz Kamalov & Linda Smail & Ikhlaas Gurrib, 2021. "Stock price forecast with deep learning," Papers 2103.14081, arXiv.org.
    12. Firuz Kamalov, 2019. "Forecasting significant stock price changes using neural networks," Papers 1912.08791, arXiv.org.
    13. Chang Liu & Sandra Paterlini, 2023. "Stock Price Prediction Using Temporal Graph Model with Value Chain Data," Papers 2303.09406, arXiv.org.
    14. Nestoras Chalkidis & Rahul Savani, 2021. "Trading via Selective Classification," Papers 2110.14914, arXiv.org, revised Oct 2021.
    15. Zi‐yu Chen & Fei Xiao & Xiao‐kang Wang & Min‐hui Deng & Jian‐qiang Wang & Jun‐Bo Li, 2022. "Stochastic configuration network based on improved whale optimization algorithm for nonstationary time series prediction," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(7), pages 1458-1482, November.
    16. Yao, Haixiang & Xia, Shenghao & Liu, Hao, 2022. "Six-factor asset pricing and portfolio investment via deep learning: Evidence from Chinese stock market," Pacific-Basin Finance Journal, Elsevier, vol. 76(C).
    17. Chu Myaet Thwal & Ye Lin Tun & Kitae Kim & Seong-Bae Park & Choong Seon Hong, 2024. "Transformers with Attentive Federated Aggregation for Time Series Stock Forecasting," Papers 2402.06638, arXiv.org.

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