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Technical analysis forecasting and evaluation of stock markets: the probabilistic recovery neural network approach

Author

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  • Andreas Maniatopoulos
  • Alexandros Gazis
  • Nikolaos Mitianoudis

Abstract

The market efficiency theory suggests that stock market pricing reflects all publicly available information regarding a given stock. To outperform the market, a shareholder must study the market's price volume patterns and predict human behaviour and tendencies. Except for conventional approaches based on fundamental or technical analysis, new tools are currently proposed using big data and artificial intelligence. This publication analyses and evaluates four commonly used deep-learning artificial neural network models. Then, it proposes a new method by adopting the 'probabilistic recovery' algorithmic approach. The dataset used consists of 501 unique company names based on real data derived from US Dow Jones. This method closely follows the market's behaviour, providing daily upwards-downwards data trends. The proposed system can be used as a tool for technical analysis regarding the prediction accuracy of trading strategies, providing approximately 60% future movements' accuracy, over 90% relative price prediction and annual investment return slightly over 60%.

Suggested Citation

  • Andreas Maniatopoulos & Alexandros Gazis & Nikolaos Mitianoudis, 2023. "Technical analysis forecasting and evaluation of stock markets: the probabilistic recovery neural network approach," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 25(1), pages 64-100.
  • Handle: RePEc:ids:ijecbr:v:25:y:2023:i:1:p:64-100
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    Cited by:

    1. Syed Hasan Jafar & Shakeb Akhtar & Hani El-Chaarani & Parvez Alam Khan & Ruaa Binsaddig, 2023. "Forecasting of NIFTY 50 Index Price by Using Backward Elimination with an LSTM Model," JRFM, MDPI, vol. 16(10), pages 1-23, September.

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