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Financial time series prediction using deep computing approaches

M. Durairaj, Ch. Suneetha, BH. Krishna Mohan

Abstract


A financial time series is chaotic and non-stationary in nature, and predicting it outcomes is a very complex and challenging task. In this research, the theory of chaos, Long Short-Term Memory (LSTM), and Polynomial Regression (PR) are used in tandem to create a novel financial time series prediction hybrid, Chaos+LSTM+PR. The first step in this hybrid will determine whether or not a financial time series contains chaos. Following that, the chaos in the time series is modeled using Chaos Theory. The modeled time series is fed into the LSTM to obtain initial predictions. The error series obtained from LSTM predictions is fitted by PR to obtain error predictions. The error predictions and initial predictions from LSTM are combined to obtain final predictions. The effectiveness of this hybrid is examined by three types of financial time series (Chaos+LSTM+PR), including stock market indices (S&P 500, Nifty 50, Shanghai Composite), commodity prices (gold, crude oil, soya beans), and foreign exchange rates (INR/USD, JPY/USD, SGD/USD). The results show that the proposed hybrid outperforms ARIMA (autoregressive integrated moving average), Prophet, CART (Classification and Regression Tree), RF (Random Forest), LSTM, Chaos+CART, Chaos+CART, and Chaos+LSTM. The results are also checked for statistical significance.


Keywords


Deep Learning; Time Series Prediction; LSTM; Chaos; Polynomial Regression; Exchange Rate; Stock Market Index; Commodity Price

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References


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DOI: https://doi.org/10.32629/jai.v6i1.558

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