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Novel modelling strategies for high-frequency stock trading data

Author

Listed:
  • Xuekui Zhang

    (Mathematics and Statistics Department at University of Victoria)

  • Yuying Huang

    (Mathematics and Statistics Department at University of Victoria
    Statistics and Actuarial Science at University of Waterloo)

  • Ke Xu

    (Economics Department at University of Victoria)

  • Li Xing

    (Mathematics and Statistics Department at University of Saskatchewan)

Abstract

Full electronic automation in stock exchanges has recently become popular, generating high-frequency intraday data and motivating the development of near real-time price forecasting methods. Machine learning algorithms are widely applied to mid-price stock predictions. Processing raw data as inputs for prediction models (e.g., data thinning and feature engineering) can primarily affect the performance of the prediction methods. However, researchers rarely discuss this topic. This motivated us to propose three novel modelling strategies for processing raw data. We illustrate how our novel modelling strategies improve forecasting performance by analyzing high-frequency data of the Dow Jones 30 component stocks. In these experiments, our strategies often lead to statistically significant improvement in predictions. The three strategies improve the F1 scores of the SVM models by 0.056, 0.087, and 0.016, respectively.

Suggested Citation

  • Xuekui Zhang & Yuying Huang & Ke Xu & Li Xing, 2023. "Novel modelling strategies for high-frequency stock trading data," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-25, December.
    • Handle: RePEc:spr:fininn:v:9:y:2023:i:1:d:10.1186_s40854-022-00431-9
    DOI: 10.1186/s40854-022-00431-9
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    References listed on IDEAS

    as
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