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Improving Stock Market Predictions: An Equity Forecasting Scanner Using Long Short-Term Memory Method with Dynamic Indicators for Malaysia Stock Market

Author

Listed:
  • Chin Soon Ku

    (Department of Computer Science, Universiti Tunku Abdul Rahman, Kampar 31900, Malaysia)

  • Jiale Xiong

    (Faculty of Computer Science and Information Technology, Universiti Malaya, Kuala Lumpur 50603, Malaysia)

  • Yen-Lin Chen

    (Department of Computer Science and Information Engineering, National Taipei University of Technology, Taipei 106344, Taiwan)

  • Shing Dhee Cheah

    (Department of Computer Science, Universiti Tunku Abdul Rahman, Kampar 31900, Malaysia)

  • Hoong Cheng Soong

    (Department of Information Systems, Universiti Tunku Abdul Rahman, Kampar 31900, Malaysia)

  • Lip Yee Por

    (Faculty of Computer Science and Information Technology, Universiti Malaya, Kuala Lumpur 50603, Malaysia)

Abstract

Stock market predictions are a challenging problem due to the dynamic and complex nature of financial data. This study proposes an approach that integrates the domain knowledge of investors with a long-short-term memory (LSTM) algorithm for predicting stock prices. The proposed approach involves collecting data from investors in the form of technical indicators and using them as input for the LSTM model. The model is then trained and tested using a dataset of 100 stocks. The accuracy of the model is evaluated using various metrics, including the average prediction accuracy, average cumulative return, Sharpe ratio, and maximum drawdown. The results are compared to the performance of other strategies, including the random selection of technical indicators. The simulation results demonstrate that the proposed model outperforms the other strategies in terms of accuracy and performance in a 100-stock investment simulation, highlighting the potential of integrating investor domain knowledge with machine learning algorithms for stock price prediction.

Suggested Citation

  • Chin Soon Ku & Jiale Xiong & Yen-Lin Chen & Shing Dhee Cheah & Hoong Cheng Soong & Lip Yee Por, 2023. "Improving Stock Market Predictions: An Equity Forecasting Scanner Using Long Short-Term Memory Method with Dynamic Indicators for Malaysia Stock Market," Mathematics, MDPI, vol. 11(11), pages 1-20, May.
    • Handle: RePEc:gam:jmathe:v:11:y:2023:i:11:p:2470-:d:1157419
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    References listed on IDEAS

    as
    1. Dhruhi Sheth & Manan Shah, 2023. "Predicting stock market using machine learning: best and accurate way to know future stock prices," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 14(1), pages 1-18, February.
    2. Mu-En Wu & Jia-Hao Syu & Chien-Ming Chen, 2022. "Kelly-Based Options Trading Strategies on Settlement Date via Supervised Learning Algorithms," Computational Economics, Springer;Society for Computational Economics, vol. 59(4), pages 1627-1644, April.
    3. Tsu-Yang Wu & Haonan Li & Shu-Chuan Chu, 2023. "CPPE: An Improved Phasmatodea Population Evolution Algorithm with Chaotic Maps," Mathematics, MDPI, vol. 11(9), pages 1-21, April.
    4. Akshit Kurani & Pavan Doshi & Aarya Vakharia & Manan Shah, 2023. "A Comprehensive Comparative Study of Artificial Neural Network (ANN) and Support Vector Machines (SVM) on Stock Forecasting," Annals of Data Science, Springer, vol. 10(1), pages 183-208, February.
    Full references (including those not matched with items on IDEAS)

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